New Jersey downgraded again: Christie “miracle” debunked

August 18, 2011

New Jersey downgraded again

Yesterday Fitch joined Moody’s and S&P in downgrading the state of New Jersey to AA-, the fourth lowest investment-grade rating. This places New Jersey in the lowest 10% of states in terms credit quality and deflates the story of Governor Chris Christie’s repair of the state’s unfunded pension liabilities. From Bloomberg:

A bill putting more of the pension and health-care burden on employees, signed by Governor Chris Christie in June, won’t prevent the need for increased state contributions, Fitch said yesterday in a report. Other negatives were a weak economic recovery, persistent deficits and high debt, the company said.

Christie, a 48-year-old Republican, signed a $29.7 billion budget in June in which he vetoed about $1 billion in spending added by Democrats who control both the state Senate and the Assembly. The spending included a pension payment of about $480 million, below the $3 billion recommended by actuaries. The state hasn’t made full payments into its pension system for most of the past decade.

My beef with with Governor Christie was that he did more blustering about the state pension fund than repairing. When the legislature agreed to changes proposed by the governor, his team trumpeted savings of $120 billion for the pension fund and stability for the state employees. But Fitch says that budgetary matters in New Jersey are still stressed. Here is Governor Christie on Meet the Press claiming other administrations did not make payments into the pension fund:


ZeroHedge: And Back To Munis, As Fitch Downgrades New Jersey GO From AA To AA-

Oh, gorgeous America

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@Twitter Talk

Bond Girl @munilass Bond Girl

Nice of the WSJ to point out multi-notch downgrades are not about rapid credit deterioration, but rating agencies being slow.
Mike Stanton @MikeStanton1891 Mike Stanton
WSJ on SuperDowngrades omits 1 key driver: Dodd-Frank-related mandate on agencies to review/update outstanding ratings
Michael Pietronico @MillerTabak Michael Pietronico
ratios to Treasuries are off the charts cheap right now for crossover investors who have the ability to access the municipal bond market
Andrew Ackerman @amacker Andrew Ackerman
One of the MSRB’s new “public” members was a banker his entire career until two years ago.
Barrett and Greene @GreeneBarrett Barrett and Greene
“Because humans are wired to avoid uncertainty we are drawn to anyone claiming to know what the future will resemble” @farnamstreet
stonecircle @stone_circle stonecircle
Unleashing the collective genius of communities to create new ways that are more nourishing, fulfilling & sustainable

+ Good Links +

CBS Money Watch: QE3?: The Fed Should Buy State and Local Government Bonds

WSJ: Downgrades Felt at Local Level

Reuters: Some US states’ woes to stretch to next year-economist

Stateline: Workers’ comp systems getting stricter

Bloomberg: Jefferson County’s Deal to Avert Bankruptcy Hinges on Hostile Legislature

Tech President: A Fresh New York Law Means More Online Transparency in the Empire State

Bloomberg: Transit Agencies Plan Fare Hikes, Service Cuts

Illinois Statehouse News: Illinois 50 out of 50 in 2010 for state deficit


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“New Jersey has approximately $31bln of appropriation backed-debt and $2.6bln in GO debt. The spread of New Jersey’s 10yr GO bonds has steadily risen this past week and closed last night at +47bps to MMD’s AAA GO scale.”

– Thomson Reuters MMD comment –

Posted by Cate_Long | Report as abusive

Credit where due: Christie is correct that ever since Christie Whitman had Larry Kudlow at the height of his coked-out-of-his-mind period making up the budget, NJ pensions have been underfunded to support tax cuts for Chris Christie.

However, if you want to say, “other administrations didn’t fund the pensions,” you CANNOT then say, “Well, I’ll put in 15% of what I should, so let’s pretend I did something right.”

Posted by klhoughton | Report as abusive