Who Fitch Really Downgraded – Again*

New Jersey’s bond rating have been downgraded seven times during the Christie administration with ratings agencies citing retirement benefit costs each time:

2/9/11 S&P Downgrade: AA- from AA

4/27/11 Moody’s Downgrade: AA3 from AA2

8/18/11 Fitch Downgrade: AA- from AA

4/9/14 S&P Downgrade: A+ from AA-

5/1/14 Fitch Downgrade: A+ from AA-

5/14/14 Moodys Downgrade: A1 from AA3

9/5/14 Fitch Downgrade: A from A+

The explanation of New Jersey’s most recent bond rating downgrade includes:

Above-average state debt obligations are compounded by significant and growing funding needs for the state’s unfunded retirement liabilities. Continued pension funded ratio deterioration is projected through the medium term and full actuarial funding of the required contributions is several years off.

It was the employee benefit liabilities yet only three years  ago the State Senate president assured us:


that the recent reform ‘clearly fixes the problem.”

Why didn’t Fitch believe him?

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More Downgrades To Come

If governments are allowed to break pension contracts because they don’t feel like paying the costs, then the bond holders are in the cross hairs too.

Richard – comment to Another Downgrade

According to documents filed this week by New Jersey defending the state’s refusal to pay a large portion of an already understated pension contribution, defaulting on bondholders was considered.  Page 4 of that brief makes that fact clear:

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Another Downgrade

Another downgrade of New Jersey’s debt and Fitch blames pensions and OPEBs that the state is incapable of fixing, freezing, or funding.

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Watchdog Journalism

New Jersey’s largest newspaper, The Star-Ledger, is reorganizing (probably to lay off more news staff) and in a front-page story yesterday in the paper (though not online) they announced that the main change will be to “feature more local content”:

watchdog journalism

I have come to realize that newspapers are a business and watchdogjournalism* is not good for business but claiming to watchdog, even if based on past history nobody is likely to believe you, is.

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Christie Lawyers Decry……..Christie

It was reported that lawyers for New Jersey Governor Chris Christie filed documents today asking Superior Court Judge Mary Jacobson to dismiss lawsuits brought by public-worker unions arguing that Christie had to cut the pension payment to avert a budget crisis.

In an ironic twist, the Christie administration’s 77-page legal brief repeatedly disavows a pension overhaul the governor helped design and signed into law during his first term — what Christie once hailed as the cornerstone of his plan to repair New Jersey’s crumbling pension system.

The 2011 law shifted more pension costs to public workers, but it also gave them a contract right to full payments from the state budget into their underfunded retirement plans every year. Now, lawyers for Christie are calling that budget obligation unconstitutional, “void and unenforceable” and economically reckless.

“The Constitution forbids the Legislature from placing an unwilling populace in an eternal fiscal stranglehold,” the state argues. Christie’s lawyers also describe the union plaintiffs as “special interest groups that seek satisfaction of their own wants at the expense of the common good.”

The state’s arguments are premised on the belief that the 2011 reform that made the actuarially determined pension contribution mandatory was illegal (though presumably Chrstie lawyers doing the advising back in 2011 would disagree) because, by point:

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Lying About Asset Values

Public pensions today all lie about the value of their liabilities (with the worst funded plans lying the most) primarily because of flaws in actuarial methodology that mask true underfunding.  In the case of New Jersey the official liability value is $132 billion while the real liability number is about $250 billion.

As for the asset side the use of actuarial value instead of market as the official asset value is one lie but, in New Jersey anyway after examining in detail the value of Alternative Investments, it looks like they are also doing some more blatant lying that they get away with because they expect everybody to trust them and the professionals they buy.  I don’t.

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Has Christie Jumped the Shark?

Reading between the lines of this Chicago Tribune article it looks like he’s toast politically.

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