New Jersey Downgraded Again

According to njbiz:

New Jersey suffered its first credit downgrade under Gov. Phil Murphy – from Wall Street rating agency Fitch – which dropped the state’s rating from A to A minus, arguing that the state could be ill-equipped to handle a COVID-19-fueled recession.

Fitch said the state was in particular trouble ahead of the ensuing economic slowdown and loss of tax revenue because of its “structurally imbalanced financial operations, as reflected in the persistent underfunding of liabilities, slim reserves and an elevated long-term liability burden.”

The agency also revised the state’s outlook to negative, indicating that it could see another credit downgrade within the next two years.

…..

Murphy’s predecessor – Republican Gov. Chris Christie – saw 11 downgrades during his eight years in office, spanning Fitch, S&P Global and Moody’s Investors Services. All three cited the state’s public worker retirement and health care plans, which were unfunded by at least $100 billion.

Governor Muphy’s reaction and some history:


.

.

 

New Jersey’s  downgrade history under Christie/Murphy:

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 Moody’s Downgrade: A1 from AA3

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

9/10/14: S&P Downgrade: A from A+

4/16/15: Moody’s Downgrade: A2 from A1

11/14/16: S&P Downgrade: A- from A

3/27/17: Moody’s Downgrade: A3 from A2

4/21/20: Fitch Downgrade: A- from A

 

52 responses to this post.

  1. Posted by NJ2AZ on April 21, 2020 at 6:03 pm

    Per Fitch: High credit quality
    A’ ratings denote expectations of low default risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings.

    what a joke. NJ should be ‘B’ at BEST

    B’ ratings indicate that material default risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is vulnerable to deterioration in the business and economic environment.

    Reply

  2. Posted by Eric on April 21, 2020 at 7:09 pm

    NJ2AZ
    We know that the ratings agencies are a joke. As I have posted, Mutual Benefit Life, formerly based in Newark, New Jersey had the highest credit rating, until it had become insolvent. It was far too late for any investor to retrieve his or her money since the change happened almost as instantaneously as flicking on a light switch.
    If a rating agency rated New Jersey or Illinois as junk, which it should, no debt would be purchased by a mutual fund company that requires investment grade risk, as outlined in its prospectus, unless it is a high yield or a junk bond fund. If that were the case, New Jersey and Illinois would “be in business.”
    The combined pension and health care benefit debt, shown above, should not be listed as at least $100 billion,but should be stated as at least $200 billion.
    Trusting New Jersey with money is analogous to trusting Bernie Madoff with one’s retirement portfolio, the New Jersey Supreme Court in following the rule of law, or most tragically, having Ted Bundy drive a teenage girl home from an event.
    This crisis in New Jersey has been in the making for more than 20 years, and should not be all laid “at the doorstep” of Governor Murphy. Why he wanted his job, I could not imagine. He seems like a decent man. I thought the same about Jon Corzine when he was running for governor, but now matters are far, far worse for Murphy.
    Eric

    Reply

    • Posted by Tough Love on April 21, 2020 at 8:40 pm

      Quoting ……………

      “This crisis in New Jersey has been in the making for more than 20 years, and should not be all laid “at the doorstep” of Governor Murphy. ”

      But shouldn’t one at least TRY it fix NJ “structural problems” (it’s pension & benefits) …………. instead of being a lapdog for the Public Sector Unions ?

      Reply

    • Posted by NJ2AZ on April 21, 2020 at 9:29 pm

      “Why he wanted his job, I could not imagine.”

      in his case, i think he anticipated a ‘promotion’ to the federal government under a different administration.

      i can’t imagine anyone would run for governor of nj because they actually believe they could fix that mess

      Reply

      • Posted by Tough Love on April 21, 2020 at 11:46 pm

        Sweeney clearly WANTS to be NJ’s next Gov. yet doesn’t look like he’s high Federal Gov’t material.

        As you asked ….. WHY ?

        Sometime I think being a lifelong politician is like being a longtime Soldier/Captain in a mafia family. You can’t remember any other life. That’s the ONLY life you know, and it is what it is, good or bad.

        Reply

        • Posted by Marine1 on April 22, 2020 at 9:48 am

          TL- He was your white knight wasn’t he. You were wrong again. You haven’t been correct yet. Guess who was correct ? 22 million civilians on the bread line. More to come.

          Reply

          • Posted by Tough Love on April 22, 2020 at 10:44 am

            Some of those Civilians may die ……. the result you’ve previously stated was your desired outcome (dead “useless” Civilians).

            Your mama would be proud.

  3. Posted by Marine1 on April 21, 2020 at 8:51 pm

    Let’s just be thankful that Christie isn’t around for the Coronavirus. He hardley could handle a hurricane. He would never have been able to handle a pandemic like this. Doesn’t have the temperament or intelligence. People like a calm presence when dealt with something like this,that’s why Murphy is at 73% today. He’s no fiscal conservative, but he’s handled this well so far.

    Reply

    • Posted by Tough Love on April 21, 2020 at 8:58 pm

      Perhaps your dislike Christie is because if his COLA “suspension” is never reversed, over your expected lifetime, it will cost you about $500,000 in lost pension payouts.

      He was the BEST Gov. Taxpayers ever had …….. from a financial perspective.

      Reply

      • Your opinion. And what did you want him to do grab a mop? He really sucked all around. Terrible role model. Obese, lying, loud mouth piece of shit.
        And last time I checked, Marine1 pension was what, $100,000 more a year than yours will be. So? Sounds like he made great life decisions when taking his whole financial picture into account. Same as El Gaupo. Max out on 457 plan, mortgage paid off in couple years. It’s the discipline that puts us in the drivers seat.
        You don’t get to be captain of the arc by being a lazy, foolhardy person.

        Reply

        • Posted by Tough Love on April 21, 2020 at 11:13 pm

          Yup, he was all those things, but AS I STATED ………….. FROM A FINANCIAL PERSPECTIVE, he was the BEST Gov. Taxpayers ever had.

          P.S. I learned a long time ago never to discuss how much money I have or don’t have ………. as it NEVER seems to be a sum that makes the recipient of the information pleased.

          You financially succeeded by ripping-off your town’s taxpayers. You should be proud.

          Reply

          • Posted by E on April 22, 2020 at 8:56 am

            Marine1 and I have no choice , outside of lying about what we do for a living, than to have people know what our salary and benefits are. 🤷‍♂️
            And I never ripped off anyone. That would imply deceit fullness or stealing.

            I agree with you normally. I never bring up what I earn or have in the bank to folks. This group specifically knows what most NJ workers earn in salary and benefits and it does apparently cause ill feelings as far as you are concerned. Oh well, what can I do. Not giving any back at all. Excepting now, as I said I would be fine with a 15% pay cut for 2 months. (For the same, and actually far more stressful work).
            I don’t think it particularly angers people to talk about mortgages or 457 contributions, other life situations that we all have or will for thru. Actual numbers or net worth is nobodies business but mine.
            In the context of this blog—-what I, not my wife earns, is public record. Pension, salary all of it. So while you don’t know me personally, I am trying to be as transparent as I can while enjoying my anonymity, you all know what northern NJ suburban cops make. I’ve been hearing it for 25 years now. Very very very few have the nerve to say it to my face. Lol. You already know what my answer to them would be.

          • Posted by bpaterson on April 22, 2020 at 1:08 pm

            TL- i agree and have stated it here before, CC was the best governor we had in at least 25 years. He was able to get a a partial leash on our out of control govt with the caps, diluted by the opposition in the legislature but caps imposed none-the less. They are still in effect too. But along with that, i commend his attempts to make many of the clueless citizens more aware of the usurious govt system that was put in place, enriching those within at our expense, thus one result being the caps that were proposed and put in place. But it was a double edged sword that these newly educated citizens recognized it was too late to do anything further of substance, there were too many entrenched, and so many have ended up disenfranchised and despondent. Outside of your repetitive rhetoric, rare have you been proven wrong in your accusations, much to the chagrin and the attempts of those trying to marginalize you. I comment your tenacity and all those out in the real world fighting the system in hopes that it does change for the better of the taxpayers. Maybe this pandemic is your ally, but sadly taking the baby with the bathwater. I do enjoy reading their feigned arrogance towards your continuous honest posits. Good luck.

          • Posted by E on April 22, 2020 at 1:40 pm

            Hey BP. What she spouts is her opinion. Very few facts.

          • Posted by Tough Love on April 22, 2020 at 2:50 pm

            E,

            Here are some FACTS for you …………

            Your pension is so ludicrously excessive, that just to fund the Plan’s NORMAL COST (i.e., NOT including the large ADDITIONAL amounts necessary to amortize the current unfunded liability) over you career (and using the SAME assumptions and methodology that the US Gov’t requires in the valuation of single-employer Private Sector DB Plans), requires a level annual total ER + EE contribution of over 50% off pay.

            Even after deducting your own contribution, that still leaves the Taxpayers responsible for a level annual contribution of about 40% of pay.

            How is that appropriate, reasonable, fair to Taxpayers, or affordable, when all that Private Sector workers typically get in retirement security contributions from their employers today is 4% to 5% of pay into a 401K Plan ?
            ———————————

            And then, you get layered ON TOP OF that, FREE retiree healthcare coverage (typically starting at an age in the early 50s) at an ADDITIONAL annual cost to Taxpayers of about $35,000/yr for family coverage.

            Yes, It’s a Taxpayer “RIP-OFF” ……….. in SPADES.

        • Posted by Rex the Wonder Dog! 🐶🐶🐶🦴🦴🦴 on April 22, 2020 at 1:39 am

          Marine1 pension was what, $100,000 more a year than yours will be.
          Until it’s $20K year when the gifted $$ runs out….

          Reply

        • Posted by Rex the Wonder Dog! 🐶🐶🐶🦴🦴🦴 on April 22, 2020 at 1:41 am

          Sounds like he made great life decisions when taking his whole financial picture public union fraud into account. Same as El Gaupo.
          Fixed, for both of our esteemed GED Coppers!

          Reply

          • Posted by E on April 22, 2020 at 9:00 am

            Maybe if we had losers like you here that can’t hold down a job we would be worried. 🤣🤣🤣
            Unlike me Rex, this blog really didn’t miss you or your pathetic dog emojis.
            Your just upset because you didn’t get an invite onto the ark. You’re not part of the gang. INCELs need not apply.

          • Posted by Rex the Wonder Dog! 🐶🐶🐶🦴🦴🦴 on April 22, 2020 at 5:26 pm

            Maybe if we had losers like you here that can’t hold down a job we would be worried. 🤣🤣🤣
            Unlike me Rex, this blog really didn’t miss you or your pathetic dog emojis.

            🙂
            I swear, it’s like taking candy from a baby…It’s almost too easy !

  4. Posted by Tough Love on April 21, 2020 at 9:12 pm

    Can someone explain this to me………..

    https://www.northjersey.com/story/news/coronavirus/2020/04/20/nj-bill-would-give-furloughed-workers-pay-hike-thanks-us-stimulus/5168174002/?utm_source=northjersey-Coronavirus%20Watch&utm_medium=email&utm_campaign=baseline_greeting&utm_term=list_article_thumb

    While many of NJ’s Public Sector workers are indeed working less HOURS, as far as I know, none are getting anything less than FULL PAY.

    So what is the justification for a pay INCREASE, even if it’s FED Gov’t funds ?

    Reply

    • Posted by Tough Love on April 21, 2020 at 9:19 pm

      Skip it ………. they explained after a series of pictures.

      Basically NJ would make them 2-day-a-week employees and then they would collect both State and Fed unemployment benefits, which for those with current wages less than about $75K, they would make MORE in total than before.

      I guess that’s what they’re calling a PAY INCREASE.

      Reply

  5. Posted by Eric on April 21, 2020 at 9:42 pm

    Tough Love:
    All insolvent state pension systems cannot be resolved or fixed from within; they all must crash and burn in the coming hyperinflationary depression. There is too much political pressure to fix them. They will fail. It does not matter who the governor happens to be.
    We saw a prelude to the pending economic calamity with the repo market crisis and the grotesque expansion of the balance sheet of the Federal Reserve.
    I am glad you feel you got your money’s worth with Christie. I take it you do not commute over the Hudson River on the George Washington Bridge. Maybe he can take you to a Dallas Cowboys game, and you can sit with Jerry Jones. I hear that private jets are still flying, but what do I know; I am a just a poor, simple, old man.
    Eric

    Reply

    • Posted by Tough Love on April 21, 2020 at 10:55 pm

      Quoting ………..

      “All insolvent state pension systems cannot be resolved or fixed from within; they all must crash and burn in the coming hyperinflationary depression. There is too much political pressure to fix them. They will fail. It does not matter who the governor happens to be.”

      Assuming hyperinflation doesn’t address it first, the political difficulty is certainly real to the Elected Officials who would essentially have to throw the Union/workers “under-the-bus” to fix it. When the Teacher’s Plans goes bust (2024 in Mr. Bury’s estimation) those Elected Officials will HAVE TO make a choice ………… HUGE tax increase or VERY MATERIAL pension/benefit reductions.

      Quoting ………..

      “the grotesque expansion of the balance sheet of the Federal Reserve.”

      YUP, that’s getting VERY concerning.

      Quoting ……….

      “I take it you do not commute over the Hudson River on the George Washington Bridge.””

      Was never a daily automobile commuter (too stressful). Not commuting at all now. At home like everyone else. Don’t want to catch COVID-19 or (should I unknowingly be a carrier) give it to anyone else.

      P.S. His stupidity wrt Bridgegate pales in comparison to the VERY material financial saving to NJ’s Taxpayers via the COLA suspension.

      Reply

    • Maybe he can get her a flight to SC with the chairman. Or show her how he used to max out his stipend by always asking for a suite when traveling as a US attorney. Or how to fight with a guy on the boardwalk. Would’ve loved to see the troopers let that guy put Christie on his fat ass.
      Marine1 is right on yet AGAIN about Murphy. He is no conservative, and we don’t like his social justice tinge at times, but he repealed the 2% arbitration cap, and gave us control over our pension fund and kept politicians hands off of it.
      The GOP has their chance to put the Byrne plan into effect. Didn’t do it. Yea…throw the cops money in with the teachers. No thanks. Lol. And I got my medical contributions eliminated due to negotiations with our employer. Clawing back all the damage fatso did.

      Reply

      • Posted by Tough Love on April 21, 2020 at 11:19 pm

        Re-read your comment.

        Greed and Self Interest guides your life.

        Reply

      • Posted by Tough Love on April 21, 2020 at 11:23 pm

        Quoting …………

        “And I got my medical contributions eliminated due to negotiations with our employer. ”

        Translation ……… us older guys fucked the newbys good. We pay nothing for healthcare now or in retirement and the new guys get NOTHING towards retiree healthcare. How SELFISH !

        Reply

        • Posted by E on April 22, 2020 at 9:08 am

          When pressed, you stated that you would’ve voted “yes” for the deal presented BY THE TOWN if in fact you were part of the bargaining unit. The town was simply FOLLOWING the lead of other surrounding towns in an effort to get older guys to retire (saving $$ up front) and then saving long term (maybe) by eliminating this benifit which you hate. Are you really going to tell everyone here that you would’ve turned that down? A deal that also provided slightly more than the average pay increase for 5 years and gave a longevity boost for the same current employees?
          The town would’ve gone to arbitration and we may have gotten much much less and maybe even lost the medical (probably not though). It is something they really were pressing for. 100% their idea. Surprised you angry about that. Maybe be angry at them. Many many towns have done this now. Just about everything I do triggers you in some way.
          As I said, you would’ve taken the deal too. Not saying you’d feel great doing it, but you would do it nonetheless.

          Reply

          • Posted by Marine1 on April 22, 2020 at 9:45 am

            E- Ever notice how we haven’t heard about a doomsday date for PFRS from John Bury ? Isn’t ironic that TL,Rex,Drone go on and on about how our pension is soooooo unfair,but guess who is going to keep getting paid ? You and I . The fund is no where close to depletion.

          • Correct. Our employers have not been nearly as neglectful as the state has been. As I said, thank god for S5. Passed unanimously. Dem and GOP. The GOP was never really happy that Christie dared challenge the PBA.
            In fact, I remember seeing the fear in the fat mans face the day the PBA mobilized and protested in Trenton. He did not expect that. I wasn’t there but saw the press conference where an unsure of himself, gov stated with an uneasy face the police risk losing the support of populace. Lol. What support did he ever give?
            GOP couldn’t wait to get rid of him. He basically shoved them aside as he kissed every dem ass he could looking for endorsements like Joe D. Ran into a problem when he tried that in Fort Lee.
            Once again, Marine1 speaking the truth. Not his fault or a successful civilian for that matter, that folks in the breadline. And again, outside of Rex, no one on this site appears to have taken a employment hit on here. Not even a pay cut.
            For the rest, as he says— adjust and be responsible for your own finances instead of looking at hard working cops to bail you out.

          • Posted by Marine1 on April 22, 2020 at 10:43 am

            E- The other thing,mark my words the States will be getting funding from the Feds in the next stimulus package. It’s already in the works,has bipartisan support,Trump will sign it. That money will be used indirectly to prop pension funds up. John B is going to have to fix his depletion dates again. Hasn’t been correct yet. Nice guy,but just saying.

          • E…
            “Correct. Our employers have not been nearly as neglectful as the state has been.”

            My understanding was that it was -required- for locals to contribute the full ARC*, but for some reason, not required for the state.
            In the early nineties, Pete Wilson (Governor) raided CalPERS to balance the state budget. In 94 a constitutional amendment gave CalPERS plenary authority. You WILL contribute what we say. No vote, no muss, no fuss, no bother. It applies to the state as well as local jurisdictions.

            *As per Mary Pat Campbell, full ARC doesn’t necessarily lead to full funding.

          • Posted by Tough Love on April 22, 2020 at 11:58 am

            Quoting Stephen Douglas …………..

            “*As per Mary Pat Campbell, full ARC doesn’t necessarily lead to full funding.”

            THAT is the skulduggery behind ALL Public Sector DB pension Plans. By using UNREASONABLY OPTIMISTIC assumptions (e.g. for investment income and life expectancy), they (the Unions and the Elected Officials they OWN) develop a Pension Plan and present it’s generosity level and the associated cost to the Taxpayers.

            But, BECAUSE OF those UNREASONABLY OPTIMISTIC assumptions (and of course the ENDLESS stream of retroactively-applied but unfunded benefit improvements), it always winds up costing MUCH MCUH more than what was initially presented to the Taxpayers.

            It’s never been anything but a “racket”, with the Taxpayers being treated as the “sucker” in the room. AT MOST, the Plan participants should get in pension benefits NO MORE than what the ORIGINAL COST presented to taxpayers could buy.

          • Posted by A on April 22, 2020 at 1:44 pm

            Now would be a good time to regulate public pensions more. It can be done by using tax deferral as a carrot. Or stick.

            There are several states which do have adequate funding (including mechanisms to freeze or reduce pensions in an emergency.) It can be done.

          • Posted by Tough Love on April 22, 2020 at 2:27 pm

            If DB Plans must continue, The must be fairer (to Taxpayers) in generosity (meaning MUCH lower ……… and VERY close in contribution requirements to what Private Sector workers typically get in 401K contributions from their employers), AND include risk-sharing elements.

      • “And I got my medical contributions eliminated due to negotiations with our employer.”

        Just curious, has anyone seen articles of how public worker healthcare relates to the whole subject of single payer/universal coverage, etc.?

        I don’t have the data, but read that in California, probably many other states, about ten percent of population is covered by public or retiree healthcare. In California, I believe that may be an advantage because of group policy pricing. Much cheaper than New Jersey, I believe.

        Reply

  6. Posted by MJ on April 22, 2020 at 9:58 am

    Mr. Bury’s next blog is in regard to the State Police depletion date

    Not sure how this would effect the individual towns if at all other than to demonstrate that all good things must come to a end

    Reply

  7. Posted by bpaterson on April 22, 2020 at 1:11 pm

    The funny part of the statement of 11 downgrades that the media tries to spin as a huge total, is that the downgrades are from 3 different rating agencies and they all follow each other pretty much. So in essence it is really 11 divided by 3= 4 downgrades. Still not good but not the horrible sound byte the useless yellow media spun.

    Reply

    • Posted by Tough Love on April 22, 2020 at 1:17 pm

      What IS amazing is that States like NJ and Ill were not LONG AGO reduced to “junk” status.

      Reply

      • Posted by E on April 22, 2020 at 1:44 pm

        Do you confirm or deny making the statement when pressed that “I’m not a fool, of course I would vote for that contract”. If you confirm then you lose your right to blast ME for taking that deal when you would take the same thing!!!!
        If you deny, well we BOTH know you’re a liar.

        Reply

  8. Posted by A on April 22, 2020 at 2:52 pm

    Immanuel Kant

    The first formulation of the categorical imperative says: “Always act so that you may also wish that the maxim of your action become a universal law.” This is to ask every time we act if we can reasonably and without wanting to contradict that everyone acts the same way.

    Reply

  9. Posted by geo8rge on April 25, 2020 at 9:59 am

    I wondered what ratings were assigned during past financial crisis:

    Puerto Rico:

    Puerto Rico appears to have thrown in the towel when its rating was cut to ‘below investment grade’. NJ is currently ‘upper mediaum investment grade’ but one rate cut from being ‘Lower medium investment grade’ (the point at which NYC got a financial control board) and 4 cuts from not being investment grade (When PR got a financial control board).

    https://en.wikipedia.org/wiki/Puerto_Rican_government-debt_crisis#Downgrade

    New York City:

    On April 4, 1975, S&P suspended the city’s single ‘A’ rating, citing inadequate information to make even an educated guess about its true financial position and cash flow for the coming months.

    https://www.hjsims.com/news-views/new-york-city-1975-1981-the-granddaddy-of-muni-distressed-credit/#.XqQ9_2hKhgY

    The Municipal Assistance Corporation for the City of New York (MAC) was established through State legislation on June 10, 1975 in order to address the New York City government’s severe fiscal crisis. In spring of 1975, the City was unable to pay its bills, a default on outstanding debt was likely, and the specter of bankruptcy was very real.

    https://www.baruch.cuny.edu/library/alumni/archives/macarchive.htm

    Reply

  10. Posted by bpaterson on April 25, 2020 at 2:41 pm

    By the comps you list, it sounds like we are still OK. Of course, with all things financial, one has to look out over the next 6 months, but then what about 1 year from now.

    Reply

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