S&P Global Ratings upgrades outlook for New Jersey but cites ‘weaknesses’

(The Center Square) – S&P Global Ratings has upgraded New Jersey’s outlook for “various long-term and underlying debt ratings” from stable to positive and affirmed its BBB+ rating on the state’s general obligation (GO) bonds.

However, the agency cited the state’s high debt burden among several “weaknesses” as part of the GO bond rating.

“The outlook revision reflects our view that the decisions made by the state on how to spend surplus revenues in fiscal years 2021 and 2022 could position New Jersey to materially improve its long-term liability profile,” S&P Global Ratings credit analyst Tiffany Tribbitt said in an announcement.

The agency also affirmed its BBB rating on additional bonds secured by annual appropriations. Gov. Phil Murphy and State Treasurer Elizabeth Maher Muoio lauded the news.

It “shows that we’ve made significant progress, all while creating a more fair and equitable playing field for the working families of this state,” Murphy said in a statement.

However, S&P said its BBB+ rating for GO bonds reflects what the agency considers to be “weaknesses,” including a high debt burden.

Additionally, the agency noted a “large structural operating deficit,” which S&P said was 9.5% of fiscal 2022 appropriations. It also called out the state’s “large unfunded pension liability,” which “has created significant structural imbalance and puts pressure on future budgets.”

Simultaneously, the agency cited several “GO credit strengths” that offset those weaknesses, including the state’s “efforts to reduce its debt burden and unfunded pension obligations.”

Last month, Moody’s Investors Service affirmed its rating on New Jersey’s outstanding general obligation debt and its outlook for the state from stable to positive.

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