Posts Tagged ‘fitch’

Christie: Downgrades “a great referendum on my fiscal policies”

When Chris Christie came into office in 2010 New Jersey’s bond ratings were AA with Fitch, AA2 with Moody’s and AA with S&P (the third highest for all three agencies and, as best I can tell, the same ratings New Jersey long-term bonds had since the last round of McGreevey downgrades in 2002).

That same year of 2010 New Jersey municipalities led the nation in bond-rating downgrades and, according to one story, Christie could not have been more pleased:

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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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New Jersey has to be bankrupt – but nobody’s telling

New Jersey has to crash and burn first. It’s inconceivable that any other state would be as fiscally dysfunctional. Mix naive government officials with no public or professional oversight and you get double-digit real* property tax increases in perpetuity.

I arrived at this conclusion recently when I learned that New Jersey local governing units need not follow GAAP so all those studies that don’t put New Jersey at the top of the list of bankrupt states are ignoring a very important factor: nobody understands the hole that New Jersey is really in.  For example, take OPEB costs and how Union County is accounting for them.

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New Jersey Localities Falling Through the GAAP

One major difference between Harrisburg, Pa and Union County, NJ is that Harrisburg and the Authority running their incinerator follow Generally Accepted Accounting Principles.  Union County, and most other New Jersey local governing bodies, do not as I learned from Richard Raphael, Executive Managing Director, Fitch Ratings Agency at the Hall Institute’s Forum on the Public Pension Crisis.
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This would have been the guy who gave Union County an AAA bond rating admitting that the finances he was studying were ‘very non-transparent’*.  I asked about that.

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