Thursday, September 23, 2010

Moody's Lowers Credit Outlook For New Jersey to Negative

Here we go, the government debt crisis, U.S. style, is on stage.

Moody's Investors Service lowered New Jersey's credit outlook to negative from stable Wednesday evening, citing its nearly $11 billion structural deficit, the end of federal stimulus funds, and the state's
unfunded retirement costs, Bond Buyer reports.

Moody's rates New Jersey's $31.6 billion of outstanding general obligation and appropriation debt Aa2. The rating agency earlier this year recalibrated the state's credit rating to Aa2 with a stable outlook
from Aa3 with a negative outlook.

New Jersey’s Office of Legislative Services anticipates a $10.47 billion deficit for fiscal 2012.

“The assignment of a negative outlook reflects our belief that the state will be challenged to fund its structural budget gap, particularly in light of its failure to fund pension contributions in the 2010 and 2011 budgets and the expiration of federal stimulus funding in fiscal 2012 as well as our expectation that New Jersey’s economic recovery will be slow,” according to a Moody’s report.


  1. "failure to fund pension contributions in 2010 and 2011"

    As of June 30, 2009, the Common Funds had unfunded commitments totaling approximately $7.7 billion.

  2. Combine the Moody's rating with an ex-Carlyle Group chair of the Pension Fund Investment Commission and Carlyle's move to offer hedge fund investments.

    Will more risk taking in the pension make Moody's rating higher or lower?