New Jersey has seen some credit downgrades over the last few years and Standard and Poor’s has put the state on its credit to watch list with negative implications. Senior Director of the state and local government group for S&P John Sugden told NJTV News Managing Editor Mike Schneider that S&P will be watching the state over the next 60 to 90 days.
“We put our rating on negative credit watch meaning that over the next 60 to 90 days, we’ll be reviewing the credit to determine what the state legislature and the governor are trying to do in terms of addressing the long term liabilities of the state, mainly the pension issue,” said Sugden.
Sugden said that S&P has been looking at the state and that there has been a trend of large and growing structural unbalances. He also said that the measures that New Jersey has taken are putting pressure on the state’s future. S&P is looking to see what New Jersey will to to address the budget gap and pension issues for fiscal year 2015 and beyond.
While there has been talk of delaying and reducing pension payments in New Jersey, Sugden said that doing so is a significant liability and that it’s important to S&P regarding downgrades.
“It’s a significant liability so it’s important to us and the fact that the state had a plan and now has to back off from that plan, it’s important,” Sugden said.
Recently S&P released a statement saying that New Jersey “stands in stark difference to many of its peers who registered sizable budgetary surpluses in fiscal 2103.” According to Sugden, New Jersey is among the lowest rated states and S&P says that there is some growth in New Jersey but that it’s not keeping up with its expenditures.
As for what S&P would like to see New Jersey do, “What we are really interested in is in seeing how there’s an effort to achieve structure balance, meaning revenues matching expenditures,” said Sugden.
While New Jersey joins California and Illinois as the three lowest rated states, Sugden says all three have large pension problems.
Sugden said that New Jersey has had several years of addressing revenue shortfalls with one-time fixes.