New Jersey 50th Again

Credit risk this time and according to The Bond Buyer teaser:

Despite last week’s downgrades, Illinois’ general obligation paper fares better than New Jersey for relative credit risk, Municipal Market Analytics (MMA) said in a commentary comparing the two lowest-rated states.

Crain’s Chicago Business (CCB) also got a copy of the MMA report and, though the headline implied a toss-up, the excerpts  included in their story clearly show why New Jersey deserves its rank:

For Illinois vs. New Jersey, Municipal Market Analytics asks: Is it better to own the general obligation bonds of a state in the middle of a budget impasse (Illinois) or the bonds of a state with a budget that only contributes to the “continued deterioration of its finances”?

The answer is Illinois, especially because payments on New Jersey bonds require continuing appropriations by the Legislature, while Illinois law makes bond payments automatic.

That may be the answer CCB wants but how could any investor feel secure knowing the New Jersey Legislature has a say in whether they get paid?

“In the near to medium term, we are bearish on the finances of both states as they are facing significant challenges and doing an admirable job making them worse,” the report says.

…..

Illinois has fewer legal options to cut pensions and retiree health care benefits, but it does have the capacity to raise revenues, the report says. New Jersey has more “theoretical ability” to reduce those costs, but the “state’s high tax burden diminishes its flexibility,” according to the report.

The option New Jersey may be perceived as having is the ability to arbitrarily cut benefits and break contracts which, again, is not a selling point for anyone you are trying to borrow money from.

Fitch Ratings and Moody’s have both reduced their credit scores on Illinois in October, although the downgrades did not raise worries about possible defaults.

New Jersey currently has a higher credit rating than Illinois. Moody’s, for example, rates New Jersey A2, two notches above Illinois’ Baa1. Market Analytics predicts the Garden State will receive a downgrade.

Both ratings agencies “raise concerns over the strain the stalemate will cause on current year finances and the longer term worry that the state’s fiscal position will be inadequate to endure another economic downturn,” Concord, Mass.-based Municipal Market Analytics says.

“It’s a horse race in which you try to pick which one is going to fall more slowly below investment grade,” said Matt Fabian, a partner in Municipal Market Analytics. “It’s a race no investor wants to win.”

Extending the metaphor, another feature of a horse race is that it does end and the Corzine tax-spree that morphed into the Christie debt-spree is something no other state could possibly keep up with – right?*

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* Seriously, if there are people from Illinois out there, please make your points.  I see New Jersey governance at all levels (from the politicians who make the decisions to the taxpayers who are uninformed as to those decisions) and I can’t imagine a more dysfunctional system.  If Illinois has one, do tell.

48 responses to this post.

  1. Posted by Anonymous on November 1, 2015 at 2:18 pm

    chris christie for president,
    says TL

    Reply

  2. Posted by skip3house on November 1, 2015 at 3:55 pm

    All considered, this is not what Pope Francis had in mind, if we understood correctly Regressive tax systems suck, just not enough money to do as we are already doing by taxing lower incomes beyond ability to pay, yet live decently.
    Change to progressive NJ Income Tax, then use time wisely to address School Funding inefficiencies on the wealthier dime/time.

    Reply

  3. Posted by Anonymous on November 1, 2015 at 7:02 pm

    Sorry I’m not usually such a drone but here’s NJ’s way to an A; force P&B reform with dedicated funding by holding ALL debt service including component unit conduit debt hostage. Our credit worthiness has already tanked and a financial sound deal can only help.

    Reply

    • Posted by Tough Love on November 1, 2015 at 8:23 pm

      I suggest that you take a basic financial economics class ……..

      Reply

      • Posted by skip3house on November 1, 2015 at 8:51 pm

        TL, There was a chance to agree, and question ‘then what….?, but you insulted instead…

        Reply

        • Posted by Anonymous on November 1, 2015 at 9:13 pm

          SOP for TL, we are all subservient to their type.

          My point is something has to happen and usually only does when ALL stakeholders, in this case the Unions, their active/retired members, Republicans, Democrats, and yes the taxpayers are forced to do so.

          Actually, at this point, it’s individuals with TL’s attitude, like Christie, that’s hindering the process from moving forward. Again, TL will respond with their typical negative reply. Unless we can move beyond this unconstructive criticism the necessary P&B reform and regressive tax issues will never be resolved.

          Reply

        • Posted by Tough Love on November 2, 2015 at 12:19 am

          Quoting skip3house … “there was a chance to agree”.

          What? Do you think an “agreement” amount commentators on this blog will accomplish anything ?

          It’s dialog & opinions …. and in my case, on occasional lengthy and accurate mathematical demonstration of the HUGE Public Sector Union/worker pension ripoff (which really seems to piss-off the Public Sector “takers” commenting here).

          Those supporting reform are venting their displeasure with the current grossly unfair/unaffordable structure, and the workers, well, they just don’t want to give up almost ANY of their current HUGE compensation advantage …. even for FUTURE service not yet worked..

          Reply

          • Posted by Anonymous on November 2, 2015 at 9:01 am

            More meaningless 1% BS from a private sector leech. Like Christie your words and in his case actions foster an environment for failure. Evidently you both share a common goal! Guess you’re both insulated from the potential significant collateral damage.

            That’s how it rolls when you’re in the 1%, even when you falsely proclaim to be in the middle class to make your case.

            BTW, Mets are done, Cowboys like Christie are as good as done. Maybe this Gov can stop WASTING your tax dollars, come home (maybe actually stay a while) to do the job he was elected and is being paid to do, NAH.

          • Posted by Tough Love on November 2, 2015 at 12:53 pm

            Anon,

            It’s your response that is meaningless …

            I’ve stated before that I’m not in the 1% (by income or wealth) and most importantly (which is why your response is meaningless):

            (a) the 1% rip-off everyone ….. BOTH public & Private
            (b) the Private Sector Middle Class rips-off nobody
            (c) the PUBLIC Sector Middle Class (via their godlessly excessive pensions & benefits and the Taxes needed to pay for it) rips-off the Private Sector Middle Class mightily.
            ———————————-

            Your repeated attempt to change the focus of the discussion (as to the “CAUSE” of the problem) from the grossly excessive, unnecessary, unjust, unfair, and unaffordable Public Sector pensions and benefits to the “1%” is a red-herring……
            and fools nobody.

          • Posted by Anonymous on November 2, 2015 at 12:57 pm

            TL, I and others believe you as much as (no more than) Christie. He too has stated he thinks he’s not rich (wealthy, whatever spin you 1% types want to put on it). Yes your comments continue to be meaningless, with a base rooted in lies!!!

          • Posted by Tough Love on November 2, 2015 at 2:01 pm

            You don’t have to be rich to be financially educated, understand and be able to DEMONSTRATE (as I have on this blog) the ROOT CAUSE of the pension mess spreading across the country (grossly excessive pensions), and rightfully advocate for MATERIAL reform ….. as I do.

  4. Please clarify: do worker contributions go to the respective pensions or the general State treasury? How about the amounts increased in the 2011 reform?

    The ultimate resolution still involves a transition to a 491k type system going forward along with a transfer of teacher pensions back to the local jurisdictions. Everything else is negotiable, including the details.

    Reply

    • Posted by Anonymous on November 2, 2015 at 11:26 am

      Employee contributions, including the increase relating to the 2011 reforms, go into the respective pension funds.

      Maybe John can confirm the ALLEGATION regarding the 2011 reform; did the State offset it’s contribution by an amount equal to the increased employee contributions?

      Reply

      • The actuaries were supposed to use the increased employee contributions to pay down the underfunding in their calculations but that was soon abandoned – likely on Christie’s orders.

        Reply

    • Posted by PatB on November 3, 2015 at 10:23 am

      All but the new 1.5% increase, which is kicked back to the municipalities to lower their contribution: http://www.nj.com/opinion/index.ssf/2015/07/christies_sleight_of_hand_on_pension_payments_opin.html

      Reply

      • Posted by Tough Love on November 3, 2015 at 1:07 pm

        Indeed ….. but to “lower” a contribution that is already3 to 4 times what it rightfully should be BECAUSE the promised pensions are ROUTINELY 3 to 4 times greater (when considering BOTH the much richer formulas AND the MUCH more generous provisions such as very young full/unreduced retirement ages and COLA increases … now suspended in NJ) in value at retirement than the pensions of comparable Private Sector workers retiring with the SAME pay, at the SAME age, and with the SAME years of service.

        NJ(dot)com is a bastion of liberal-biased BS.

        Reply

  5. Posted by skip3house on November 2, 2015 at 2:22 pm

    Anon/TL You do agree here?
    A NJ Income Tax high enough to stop the cruel school property tax (and rebates) will eliminate such instances as recently reported move from a 1.5 million dollar home in Hunterdon? County, property tax of $40K/yr, to same price luxury apt in Hoboken? with $4K property tax. No Abbott subsidies to be taken advantage of.
    They would pay the same higher NJ Income Tax for schools in either place…….

    Reply

    • Posted by Anonymous on November 2, 2015 at 2:35 pm

      Yes with a, if legal to do so, non homestead (ie non resident) property tax premium to help offset the loss in that homeowners income tax.

      Reply

      • Posted by dentss dunnigan on November 2, 2015 at 3:00 pm

        If a new jersey resident works in New York he pays very little in state income tax ..NY gets the first bite then NJ get what is the difference between the two .So you have some very high earners working in the city but paying very little here

        Reply

        • Posted by Anonymous on November 2, 2015 at 3:05 pm

          That’s a multi-State agreement that can be changed.

          Reply

          • Posted by Anonymous on November 2, 2015 at 3:08 pm

            Sorry clicked post to soon, also may require a change to NJ income. Those indivuals only do so because it’s cheaper (cost of real estate and property taxes) to live in NJ.

    • Posted by Tough Love on November 2, 2015 at 3:17 pm

      Property taxes (while indeed very high in NJ) somehow only seems to be cruel AFTER YOUR children have already Graduated from the Public School system.

      Nary a peep at the bargain you’re getting for educating each child (at $15K-$20K per kid annually) while they ARE still in the Public School system.

      Reply

      • Posted by Anonymous on November 3, 2015 at 1:05 pm

        TL, yes don’t you love the ones who got their kids educated for “free” (in reality they were just getting more bang for the buck at the time) and then have the nerve to say they should no longer pay school tax? Ironically I have found that it is peiple in their 60s and 70’s that complain the most. People older than that don’t seem to let it bother them. Generally speaking. Or at least they are not as vocal about it.
        I find it nauseating to hear “these kids don’t need this” “I didn’t have computers in school” etc. And would undercut these kids in a heartbeat. While in the same breath, enjoying free health care in many cases, a pension, and other perks that future generations will not have. I find that age group to be the biggest “hooray for me fuck the other guy” generation going.

        Reply

        • Posted by Tough Love on November 3, 2015 at 3:03 pm

          Well Stated. …….. and MUCH of it tied to the grossly excessive (by EVERY reasonable metric) pensions & benefits of Public Sector retirees

          Reply

    • Posted by Anonymous on November 2, 2015 at 3:34 pm

      S3H your thoughts, based on TL’s response (below), middle class or 1%?

      Reply

      • Posted by Anonymous on November 2, 2015 at 3:43 pm

        OK above, never know where your posts will end up…… And TL, so now public education in NJ’s a bargain……

        Reply

        • Posted by Tough Love on November 2, 2015 at 7:04 pm

          The “point” was that …….say with just an average of 2 kids, and the average town “cost” of $15K-$20K per kid ….. and with Most NJ homeowners’ property taxes in the $8K-$15K range, yes you’re getting quite a “bargain” in the cost (INCLUDED in your property taxes) of educating your children.

          Reply

          • Posted by Anonymous on November 2, 2015 at 7:51 pm

            Fair and equal? I guess if the PRIVATE sector was providing our children’s education it wouldn’t be such a bargain. Maybe you should have mentioned the PTRF $ that fund public education!

          • Posted by Tough Love on November 2, 2015 at 8:31 pm

            Wrong Anon, NJ teachers’ pensions, now being a responsibility of the State (not localities) does NOT contribute to local property taxes.

          • Posted by Anonymous on November 2, 2015 at 8:47 pm

            Duh I know that but it contributes to the total per pupil cost! Maybe you’re not as financial astute as you think?

          • Posted by Tough Love on November 2, 2015 at 9:40 pm

            Anon, wrong again. The per-pupil costs that we here about are ONLY from the Locality. Those are in the $10K-$15K range.

            Of course the State responsibility is huge (and incredibly underfunded …. which is why the State is trying to shift that burden to the Localities) and likely would add another $5K per pupil if complied.

          • Posted by Anonymous on November 2, 2015 at 10:10 pm

            Once again you misunderstood my original point. I stated but you should have mentioned the PTRF $ used to fund public education which contributes to the REAL (OK I left that word out) per pupil cost. There are other State appropriations to Local governments, some of which funds their way to public schools. However they are insignificant when compared to employees’ (teachers’) P&B. Finance 101 is dismissed for tonight.

          • Posted by Tough Love on November 3, 2015 at 12:12 am

            State education support to OTHER THAN the Abbot districts is minuscule …. less than 3% of my town’s school budget.

      • Posted by Tough Love on November 2, 2015 at 7:11 pm

        Anon, STILL trying to make THAT (whether I’m in the 1%) the issue of importance …instead of the need for Public Sector pension reform …… yes, via a very material REDUCTION in promised FUTURE service pension accruals ?

        You’re fooling nobody.

        Reply

      • Posted by skip3house on November 3, 2015 at 1:16 pm

        Education of all kids helps us all remain civilized, just pay tax based on ability to pay

        Reply

        • Posted by Tough Love on November 3, 2015 at 3:08 pm

          As long as “ability to pay” includes ALL sources of income …. whether taxable or not. And perhaps net worth as well…. e.g. a business that can be “sold” for millions….

          Also, there are those who pay little income taxes on MASSIVE tax-free municipal bond investments. No reason for the income from such investments to be excluded from contribution to education costs.

          Reply

        • Posted by Anonymous on November 4, 2015 at 7:27 am

          Once again, when called out, TL changes their position – continual double talk from the master of disaster!!?

          Reply

  6. Posted by Anonymous on November 4, 2015 at 11:07 am

    NJ.com reports Den cratic Assembly victory as GOP drone (PS) falls from the sky!!! See you at the polls in a year, happy voting drones.

    Reply

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