New Jersey had credit ratings on about $36 billion of bonds reduced by S&P Global Ratings on expectations of worsening budget pressure brought on primarily by underfunded pension obligations, Bloomberg News reported yesterday. The general-obligation rating was cut by one step yesterday from A to A-, the fourth-lowest investment grade. It’s the 10th downgrade from the three major rating companies under Governor Chris Christie, the most of any New Jersey governor. New Jersey had an AA rating, the third highest level, from S&P at the start of his tenure in 2010. New Jersey’s pension system had about $136 billion less than it needs to cover all the benefits due when workers retire, the result of the state’s more than decade-long failure to put enough money into the fund each year. Those annual payments are now soaring as the government is under pressure to pay down that debt, exerting a strain on New Jersey’s budget. Currently, New Jersey only has 37.5 cents available to pay each $1 of benefits, according to data compiled by Bloomberg. S&P has a negative outlook on the state, indicating it could be downgraded again.
