Moody's Investors Service upgraded New Jersey to A2 from A3 Wednesday.
The upgrade to the state's general obligation bonds and Garden State Preservation Trust debt “incorporates the state's continuing trends of strong revenue and liquidity and its steps to more aggressively address liability burdens, including completion of a debt-reduction program and increased pension contributions, which are consistent with improving governance and fiscal management,” Moody’s said.
Moody's moved the state's outlook to stable from positive at the new, higher rating.
Also upgraded were New Jersey's subject-to-appropriation bond rating, raised to A3 from Baa1 for bonds financing essential-purpose projects and to Baa1 from Baa2 for bonds financing less-essential projects.
“The rating also acknowledges that, despite the state's diverse economy and wealthy tax base, it retains retirement benefit liabilities that are among the largest of the 50 states and that will present recurring fiscal pressure and increase the state's vulnerability to financial market downturns,” the agency said.
“Our efforts to build New Jersey’s credit rating back up from decades of downgrades have yielded another positive result. This proves that facing our challenges head on — rather than delaying and deferring — is the best way to get our house in order," Gov. Phil Murphy said in a release. “I’m proud to say that making the full pension payment, retiring more than $3 billion in bonded debt, and reducing our reliance on borrowing has improved the state’s fiscal footing without slashing the vital programs benefitting New Jersey families.”
The governor said the action came after
"It is easy to see that economic activity in the state has accelerated," John Hallacy, founder of John Hallacy Consulting LLC, told The Bond Buyer. "Deleveraging is key. Reducing the debt and making greater payments to the pension funds represents sound financial management."
The essential-purpose appropriation financings included bonds issued by the New Jersey Transportation Trust Fund Authority and school construction bonds issued by the state's Economic Development Authority. Also upgraded to A3 from Baa1 was the New Jersey County College Enhancement Bond Program Chapter 12.
Less-essential project financings include bonds issued by the New Jersey Sports & Exposition Authority.
Liberty State Park Project Bonds issued by the New Jersey Economic Development Authority were affirmed at Baa1.
The program ratings for the state's aid intercept enhancement programs — the New Jersey Qualified School Bond Program and the New Jersey Municipal Qualified Bond Program — were raised to A3 from Baa1.
In addition, the New Jersey Transportation Trust Fund Authority’s Federal Highway Reimbursement Revenue bonds were upgraded to A3 from Baa1.
The ratings on the bonds issued by the South Jersey Port Corp. were affirmed at Baa1.
New Jersey is rated BBB-plus by S&P Global Ratings, A-minus by Fitch Ratings and A by Kroll Bond Rating Agency.
“This is great news for the state and, more importantly, our taxpayers. Our improved credit rating will not only decrease the cost of annual borrowing for the State, saving taxpayers money now and in the future,” Treasurer Elizabeth Maher Muoio said. “But it also provides further evidence that we are taking the right steps on our continuing path toward fiscal security.”
Moody's stable outlook is based on "expectations the state will maintain recently improved governance practices and continue to benefit from a more proactive liability management approach and the from the impact of both federal support and a better-than-expected revenue recovery after the pandemic-induced recession. This includes the enhanced financing-level ratings for schools and local governments that issue under the intercept programs," the rating agency said.
Moody's added that the outlooks on the enhanced financing-level ratings for schools and local governments that issue under the intercept programs match the outlooks on the programmatic ratings.
