Here is a listing of New Jersey’s credit downgrades over the last five years:
- 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+
- 9/10/14: S&P Downgrade: A from A+
- 4/16/15: Moodys Downgrade: A2 from A1
More will come if the state has to pay COLAs again.
nj.com just reported that Standard and Poor’s Ratings Services (S&P) lowered its outlook for New Jersey debt from stable to negative Tuesday over concerns with the state’s declining pension funding levels and growing retirement liabilities and noted that:
Standard and Poor’s also highlighted the potential impact of a lawsuit pending before the New Jersey Supreme Court that could require the state to reinstate cost-of-living increases for retired public workers, which would boost the state’s $40 billion in unfunded liabilities higher and annual required payments even higher. (The state’s unfunded liabilities are $135.7 billion under a different accounting standard)
Those increases were frozen as part of a 2011 pension reform package designed to cut system costs. Oral argument were held last week.
S&P’s change in outlook “reflects our view of the significant long-term pressures the state is under related to its postemployment benefits and the potential for New Jersey’s situation to worsen over the next year or two based on current litigation and proposed legislation,” S&P analyst John Sugden said in a report.
Those oral arguments in Berg v. Christie last week were a disaster for the state and any justice on that New Jersey Supreme Court inclined, for career reasons, to the state’s position will be hard pressed to manufacture a rationale. So what S&P is doing here is anticipating the return of COLAs (and the loss of the hyperinflation tool for getting out of this pension mess) and then a tenth downgrade. Fitch and Moody’s should follow shortly after with the only question being the number of notches.