New Jersey’s bond rating takes another hit over pension
New Jersey's bond rating was downgraded this week over the state's pension contribution shortfall, marking the ninth time since Gov. Chris Christie took office in 2010 that a major agency has lowered its rating for the state.
The action and the reason for it are familiar.
So is the aftermath: The Republican governor's administration calling on the Legislature to agree to a second major overhaul of the pension and benefit system for public workers in five years.
Meanwhile, the Democratic state Senate president is criticizing the governor for not fulfilling promises to fund the pension and not ushering in a bigger overall economic boom for the state.
When it issued the downgrade on Thursday, Moody's Investor Service said that it expects the state's liquidity to remain "very weak" for more than a year, though it also acknowledged "some stabilization" in the state budget's performance and the state's economy.
The new rating, A2, is a step lower than the previous A1. But the firm still considers New Jersey bonds a sound investment. The change could mean the state has to pay higher interest rates.
Moody's said the state could improve the rating by improving its pension funding position. And if it doesn't do that, the firm said, the rating could slide further.
"I'm glad that Moody's agrees with me," Christie told reporters after an event Friday in New Hampshire. "What it says is that if we fix the pension problem, the problem would be fixed. And so from my perspective, it just backs up everything I've been saying in the town hall meetings across the state since I presented the budget. So I hope that the legislature's listening to that, I hope the public sector unions are listening to it. Let's all get together, work together (and) fix the pensions."
Public workers' pensions have been the center of a big debate over the past year.
After state revenues fell short of expectations a year ago, Christie, who is deciding whether to seek the 2016 Republican presidential nomination, backed out of his part of a 2011 deal to increase funding to the pension system to catch up for all the years when past governors skipped payments or made relatively small ones. Christie said the state didn't have the money to pay the full amount, which would have been about $3 billion in the fiscal year that kicks in July 1.
Unions for public workers are suing over his action. Arguments are scheduled before the state Supreme Court next month. In the meantime, Christie is calling for another round of changes to pensions that includes shifting workers to 401(k)-style plans, instead of defined-benefit pensions.
On Friday, Christopher Santarelli, a spokesman for the state treasurer's office, said in a statement that the Moody's action should be reason for lawmakers to join with the governor's overhaul plans. "We urge the Legislature to join the Administration in supporting and enacting recommendations from the nonpartisan Pension and Health Benefits Study Commission to address this issue," Santarelli said.
State Senate President Steven Sweeney did not appear ready to jump on the bandwagon.
"This is what happens when the administration fails to make the legally required pension payments and does nothing to generate economic growth," he said in a statement. "This is the ninth credit downgrade and the administration still doesn't get the message."
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