Wall Street continues to applaud the economic plan of the Murphy Administration.
Fitch Ratings upgraded New Jersey’s credit rating on general obligation bonds to “A” from “A-” while maintaining the state’s outlook at positive. Since the enactment of the FY2022 state budget, New Jersey has received three credit rating upgrades.
In making their decision Sept. 12, the rating agency outlined that New Jersey’s “strong fiscal momentum of recent years and consistent policy actions to confront its long-term fiscal and liability challenges reflect a notable improvement in budget management. These steps have materially improved the state’s near-term resilience and are likely to yield further gains going forward.”
Robust Revenue Collections
Additionally, the agency cited the state’s efforts to prioritize building a sizable fiscal cushion amid “robust revenue collections” in recent years, while simultaneously addressing debt and pension liabilities. This is the first time Fitch has upgraded New Jersey since it started rating the state in 1992.
“We’ve made remarkable strides to get our fiscal house in order, from making our full pension payments two years in a row to building a strong, reliable surplus that will help our state weather potential storms,” said Gov. Phil Murphy in a press statement. “There’s no doubt our fiscal position is far stronger than the situation we inherited, and we’re committed to continuing on this path to a more resilient, affordable New Jersey.”
Different Budgetary Approach
The rating agency noted that during the economic expansion that ended with the pandemic, budgetary management in New Jersey was hampered by a delayed economic recovery and longstanding practices that weakened operating performance. Fitch specifically cited “aggressive revenue forecasting, a reliance on non-structural actions and a contentious decision-making environment.”
But the Garden State financial performance had improved in the years leading into the pandemic, aided by stronger economic growth, more conservative revenue forecasting and “explicit efforts to budget a more sizable ending balance as a first cushion against underperformance,” according to the rating agency.
“Today New Jersey finds itself on more solid fiscal footing than we were before the COVID-19 pandemic and many years prior,” commented State Treasurer Elizabeth Maher Muoio. “We took advantage of our state’s solid economic recovery to invest in New Jersey’s future, including paying down debt and fulfilling our obligations. We’re proud of this progress, as evidenced by upgrades from three of the major rating agencies.”
Fitch Follows S&P
The Fitch news follows rating agency S&P Global Ratings upgrading the outlook for New Jersey’s general obligation bonds from stable to positive on Aug. 19, citing the full payment into the state’s pension funds as well. In total, the Garden State has received two credit rating upgrades and five outlook upgrades from all four major rating agencies for the last two budgets signed into law by Murphy.
“The outlook revision follows the second consecutive year the state has budgeted the full annual actuarially determined contribution to its retirement systems,” said S&P Global Ratings credit analyst David Hitchcock in a press statement.
The Fitch and S&P rating approvals comes in the wake of the passage of a record breaking $50.6 billion budget for fiscal year 2023. The budget deal includes the $2 billion ANCHOR property tax relief program replacing the Homestead Benefit Program; a back-to-school sales-tax holiday; a $6.8 billion in surplus to help the state weather a slowdown in the economy; $1.7 billion in federal American Rescue Plan aid for capital projects around the state; and $12.7 billion in direct aid for schools.
Besidens Fitch and S&P, Kroll Bond Rating Agency and Moody’s Investors Service have all raised the Garden State’s credit rating in the last year.