UPDATE 1-S&P puts New Jersey on notice of possible ratings cut

Mon Jun 2, 2014 3:56pm EDT

(Changes headline; adds S&P quote, Christie comment)

June 2 (Reuters) - New Jersey could be downgraded again because of its growing budgetary imbalance and underfunded public pension, Standard & Poor's Ratings Services warned on Monday.

S&P had already cut the state's rating to 'A+' in April. Wall Street's two other main credit rating agencies soon followed in slicing the state to a single-A rating. That put New Jersey among the three lowest-rated states, along with California and Illinois.

S&P will resolve its negative creditwatch in 60 to 90 days following the outcome of state budget deliberations, it said on Monday. New Jersey Governor Chris Christie said on May 20 that he plans to slash pension contributions after having to reduce revenue projections by at least $2.7 billion through fiscal 2015.

"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," S&P analysts said in their comment.

During his May news conference, in response to a Reuters question, Christie said he was not concerned that his solution to close the state's budget gap would lead to further downgrades, which could lead to higher borrowing costs.

Earlier this year, Christie began calling for additional changes to the public employees' retirement system, following bi-partisan reforms in 2011 that laid out gradually increasing contributions to the pension funds.

Through executive order, Christie has already slashed one of those planned payments for fiscal 2014 because of the budget crunch. He now hopes lawmakers will agree to abandon the full 2015 payment as well.

But Christie has yet to lay out specific, formal proposals for pension change, S&P noted. Democrats have also said they will not back more reforms, so "legislative support for another round of pension reform is unclear," the S&P analysts said. (Reporting by Hilary Russ; Editing by Dan Grebler)

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (1)
rutnerh wrote:
Another politically motivated jab into Christie ‘s gut besides Bridgegate. How about downgrading NY City’s rating under deBlasio for his far wilder socialist spending spree?

Jun 02, 2014 4:32pm EDT  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.