Moody Outlook for New Jersey

In the transition between gubernatorial administrations in New Jersey  an epistolary dispute has broken out with incoming governor Murphy wanting outgoing governor Christie to basically take a vacation from any activity:

with Christie claiming more needs to be done and defending his tenure:

“I can only wish to have inherited a budget in the shape that I am passing to you,” Christie told Murphy. “There is no basis for comparison whatsoever between the fiscal shape of the state today versus this time eight years ago.”

Moody’s Investors Services had their opinions…

assigning a Baa1 bond rating to New Jersey’s $175 million State Contract Refunding Bonds (Hospital Asset Transformation Program), Series 2017 issued by the New Jersey Health Care Facilities Financing Authority with this rationale:

The Baa1 is notched off the state’s A3 GO rating, reflecting the need for annual legislative appropriation of state contract payments backing the bonds. A large majority of the state’s net tax-supported debt is subject to appropriation, and the importance of maintaining access to the capital markets provides strong incentive for the state to make these appropriations.

New Jersey’s A3 rating primarily reflects its significant pension underfunding, large and rising long-term liabilities, a persistent 11% structural budget imbalance, and weak 1.3% fund balances. Despite large increases in pension contributions since 2012, the state’s contributions remain well below actuarial recommendations. Moreover, tax cuts enacted in January 2017 and a reliance on optimistic revenue growth assumptions to balance the budget may make it harder for the state to keep pace with its statutory pension contribution schedule.

It was also reported that Moody’s Investors Services recently put together a report presaging troubling times for pensions belonging to the 50 largest local governments.

During 2017, ANLPs for most governments outlined in the report are expected to rise by 33%, and then fall to 8%-10% in fiscal 2018. The analysis has cited that many of these governments report their pensions in arrears which have contributed to a lagging of recognition of 2016’s weak investment returns as well as declining market discount rates.

The report goes on to indicate that most of the governments listed are not contributing enough to their pensions funds to avoid the growth of liabilities. Out of the 50 largest local governments in the report, only 16 have made contributions that were sufficient to cover the cost of their debt for the fiscal year; this includes covering service cost and the cost of implied interest on their reported net pension liabilities.

Additionally, seven of the 50 largest had a “budget shock” indicator greater than 10%. This is an indicator that warns of impending losses of 25% or more due to market conditions.  Lastly, five of the 50 largest reported unfunded OPEB liabilities those were greater than 100% of their operating revenues.

The actual report requires a subscription to get details but after playing with the links a little it seems that this chart was part of it:

22 responses to this post.

  1. Posted by Tough Love on December 18, 2017 at 1:34 pm

    Just watch how Murphy screws NJ’s Taxpayers by allowing the 2% Police Salary arbitration cap to expire.

    Most of the time those who seek Gov’t office need BOTH money and Union votes. He rich, so all he needed was their votes.

    Looks like he sold his soul to the Unions for their votes.

    Reply

    • Posted by Anonymous on December 18, 2017 at 2:11 pm

      Oh well with the SALT cap and now this I’d say Sunshine State here I come…..just not in an evacuation zone!

      Reply

    • Posted by George on December 18, 2017 at 8:05 pm

      The photo of Murphy and cut out Christie is from the Shutdown caused by the inability to pass a budget. How does Murphy raise salaries? Tax increases probably only cover cost increases.

      Reply

    • Posted by PS Drone on December 19, 2017 at 11:26 am

      So what’s new? This is New Jersey after all. Soprano’s screenwriters could not have written it any better. Once again we deserve what we vote for and NJ deserves it as much or more than any similar F’d up state –e.g. CA, IL, CT, NY, MD.

      Reply

    • Posted by stanley on December 19, 2017 at 2:03 pm

      He’s a lefty. Has been one for ages. From taxachusettes. Democratic finance chairman under Howard Dean. We will see if he is worse than Corzine or better than Corzine. It should be interesting to watch–from a distance.

      Reply

  2. Posted by Anonymous on December 18, 2017 at 3:34 pm

    John,

    I know this is an impossible question to answer in detail but what does your gut tell you the top 5 States are doing right versus the bottom 5 States? Is it significantly lower P&B and/or budget decisions that better fund their P&B?

    They all have DBP and OPEB at varying levels? Is NJ salaries, DBP, and OPEB that much greater than other States (comparing PW to PW). I know, as you may know to, FL still has DROP and prior to ~2011 employees did not contribute into their DBP. I’m sure there are a lot of differences across the board making it a difficult analysis/comparison.

    I’m not trying to advocate any particular level of PW P&B nor complicate this discussion with that of private sector salary and P&B. Rather highlight the decisions/choices made by States with better funding ratios.

    Reply

    • Posted by Tough Love on December 18, 2017 at 4:51 pm

      To me the answer is obvious ……….. the States’ taxpayers have been suckered to different degrees in funding P&B MUCH MUCH more generous than what their Taxpayers typically get from their employers.

      In fact, NJ’s Taxpayers (with NJ having one of the WORST funding levels) have ALREADY contributed enough to pay for 100% of a pension EQUAL to that typically granted it’s Private Sector Taxpayers.

      Reply

    • Posted by Anonymous on December 18, 2017 at 5:44 pm

      Guess I should have opened it up to the blogsphere for reply but try to stay on point with my question; State PW P&B comparisons only.

      Reply

      • Posted by Tough Love on December 18, 2017 at 6:18 pm

        Ignoring a comparison of Public Sector P&B to that typically granted the Private Sector Taxpayers who’s contributions (and the investment earnings thereon) pay for 80% to 90% of Total Public Sector Plan costs is ignoring what’s MOST IMPORTANT. and most relevant.

        What’s NOT relevant is comparing the excessive P&B of one State or City to that of another State or City also with excessive P&B.

        Reply

        • Posted by Anonymous on December 18, 2017 at 6:38 pm

          Ok so FL #1 ranking still irks you with their extremely better funded P&B with ZERO income tax and lower property taxes. With, of course, relatively speaking lower salaries – gotcha!

          Reply

          • Posted by George on December 18, 2017 at 8:09 pm

            Florida gets a lot of NJ pension money and retiree health care spending. I wonder if a report of money paid by NJ to each state in terms of benefits and health care based on where the checks are cashed can be compiled?

        • Posted by Anonymous on December 18, 2017 at 7:06 pm

          Your position reeks of 110% fiscal conservative. Never a harsh word on Fed pensions, especially military. SOP is Fed’s can print money and it’s distracting from the State)Local issue. Hope you enjoy your Trump tax cut for the rich!

          Reply

          • Posted by Tough Love on December 18, 2017 at 7:28 pm

            Ask any Private Sector office worker with wages in the $75K to $100K range and a 3%-of pay 401k (Plus employer paid-for share of SS) as his only employer-paid for retirement security, and ZERO employer-sponsored retiree healthcare if the pensions of his/her City/State’s Public Sector workers are fair to HIM/HER.

          • Posted by PS Drone on December 19, 2017 at 11:22 am

            You need to stop the broken record routine.

  3. Posted by Anonymous on December 18, 2017 at 5:31 pm

    Clearly you didn’t comprehend my question but, as always, your opinion is taking, lightly, to heart.

    Reply

  4. Posted by SMH on December 18, 2017 at 7:14 pm

    Anonymous @3:34

    If you are looking at the chart above, that is overall fiscal condition.

    You seem to be talking about the condition of pensions only. In his Dec. 14 blog, John links a report from ALEC comparing the states by pension obligations.

    https://www.alec.org/app/uploads/2017/12/2017-Unaccountable-and-Unaffordable-FINAL_DEC_WEB.pdf

    Table 3 lists the funding ratio of all states (using risk free rates.)

    There, Florida is #11.

    New York is third best funded, and they have among the highest P&B in the nation.

    Kentucky and Mississippi are among the five worst funded, and they some of the lowest P&B.

    If there is any correlation, my gut says states that don’t fund their pensions adequately are also sh*tty about handling all their other finances.

    Reply

  5. Posted by George on December 18, 2017 at 7:38 pm

    A simplistic model for a government bailout of state pensions: I count 32 states that are blue (Good fiscal condition), and 18 (poor fiscal condition) so getting 25 Senators to back a bailout will be a problem. Although if you throw in MEPPs like Central States Teamsters you might get enough of the blue to pass it.

    Reply

  6. Posted by George on December 18, 2017 at 8:00 pm

    Commenting on the picture, Murphy is already kind of annoying.

    The cut out of Christie is from the shutdown of the state government. The shutdown was not exactly Christie’s fault. The shutdown only applied to one beach in NJ as most beaches are not State run. The shutdown is part of the financial problems Murphy has yet to publically address and will probably cause the same shutdown when he is Governor.

    Murphy visited Puerto Rico and agreed to welcome people temporarily displaced from the storm-ravaged island to take shelter in New Jersey. The problem with this is Puerto Ricans have US citizenship and travel documents, they don’t need Murphy’s permission or support. Money might be nice, but Murphy is not coming up with any, and the federal government is doing as little as possible.

    Both gestures display a kind of ignorance I thought NJ might avoid with a governor who on paper has a fantastic resume.

    Reply

Leave a Reply to stanley Cancel reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: