S&P downgrades New Jersey’s debt rating again

NEWARK, N.J. (AP) -- Analysts at Standard & Poor's on Wednesday downgraded New Jersey's debt rating once again, citing structurally unsound budgets and delayed contributions to the state pension fund.

The state's rating was lowered from A+ to A, with a stable outlook. The move comes after Gov. Chris Christie scaled back planned payments to the state public workers' pension fund because of a larger-than-expected budget hole.

In a release, the company cited a trend of structurally unbalanced budgets, a reliance on one-time measures, a lack of consensus among elected officials, as well as the state's growing unfunded pension liability as driving the downgrade.

"New Jersey continues to struggle with structural imbalance and the governor's decision to reduce pension contributions in fiscal 2014 and 2015 highlights the fact that the state lacks the revenues to comply with its own agreed-on contribution to the pension system," it read. "In our view, the governor's decision to delay pension funding, while providing the necessary tools for cash management and budget control, has significant negative implications for the state's liability profile."

An S&P spokesman said New Jersey is now tied with California as its second-lowest rated state after Illinois. The change marks the state's eighth downgrade on Christie's watch. Fitch Ratings dropped the state's credit rating one step last Friday.

A spokesman for the state treasury department said the decision did not come as a surprise given the tendency of rating agencies to follow one another closely, and said New Jersey bonds remain "strong investment-grade securities" and "highly coveted by municipal bond investors."

He said the governor has been highlighting the need for new pension and benefits cuts and put the onus on leaders in the state legislature to join his cause.

A lower credit rating signals caution to investors and results in higher borrowing costs to the state.

The news comes after New Jersey's Treasury Department said revenue from the fiscal year that ended June 30 fell below expectations even after they were revised downward.

A bond document released Tuesday said revenue was $275 million below projections for the fiscal year, even after the state adjusted expectations for the year downward by $1.3 billion. The government bridged the budget gap mostly by reducing payments to the pension system for public workers.

Business tax, lottery and payments from casinos were all below expectations. Revenue from income taxes was slightly above the revised projections.

The disclosure also warned that because of Atlantic City casino closings, the state is in jeopardy of falling short again in the new fiscal year on revenue from casinos.

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