Citing sustained progress on pension funding and debt reduction, Moody’s Investors Service Friday lifted its rating outlook on New Jersey to positive from stable, while affirming its issuer and general obligation bond ratings at A2.
“The positive outlook is supported by the likelihood the state will continue its current practices for managing reserves and long-term liabilities which could support improvement in the rating,” Moody’s said.
The action follows a similar one made by S&P Global Ratings last month that revised the outlook to positive from stable, putting New Jersey’s outlook at positive with all four major credit rating agencies.
Bloomberg News
The outlook boost is “further proof that the steps we’ve taken to right our fiscal ship have led to real progress,” New Jersey Gov. Phil Murphy said in a statement.
Moody’s highlighted “full pension payments and retirement of some debt” as key to affirming the A2 rating as well.
In the last two years, the rating agency said, New Jersey leveraged strong tax collection seasons to pay down billions in bonded debt while meeting annual obligation to its pension system for the first time in nearly 25 years.
“The state’s improved reserves position it to better withstand potentially less favorable economic and revenue trends in the year ahead.” Moody’s said.
On the other hand, the state’s $186 billion in unfunded pension obligations, one of the highest rates in the nation, remain as a continued Achilles heel to the state’s long term fiscal health.
“The rating continues to reflect long-term liability and fixed cost burdens that are much higher than those of most states,” the rating agency said.
The decision by Moody’s also affirmed debt issued for the Garden State Preservation Trust at A2 and bonds issued by the New Jersey Transportation Trust Fund Authority, the New Jersey Economic Development Authority, and various other state authorities at A3.