KBRA Affirms A+ Rating for New Jersey's General Obligation Bonds, Assigns Positive Outlook

Strategic Insights -

The New Jersey State government's commitment to conservative budgeting practices has earned it a long-term A+ rating for its General Obligation Bonds, according to a recent rating affirmation by Kroll Bond Rating Agency (KBRA). The agency has also revised the rating outlook to Positive, reflecting the state's progress in reducing long-term pension liabilities. KBRA's analysis highlights the state's strengths in maintaining a strong economic base and adhering to financial discipline.

Key Takeaways:

  • KBRA affirms the long-term rating of A+ for the State of New Jersey's General Obligation Bonds.
  • The Positive Outlook reflects the state's progress in reducing long-term pension liabilities and maintaining conservative budgeting practices.
  • KBRA assigns a long-term rating of A to the New Jersey Transportation Trust Fund Authority (NJTTFA) Transportation Program Bonds, 2025 Series AA.
  • The rating actions reflect the state's strong economic base, per capita personal income, and Governor's broad executive powers under the New Jersey Constitution.
  • Credit challenges include unfunded pension and OPEB liabilities, high relative to personal income and gross state product.
  • Rating sensitivities include consistently balanced operations, full actuarially determined pension contributions, and economic growth patterns that meet or exceed regional and national trends.
  • A resumption of underfunding full actuarial pension contributions and significant diminution of reserves could lead to a downgrade.
  • The state's strong operating reserves and adherence to conservative budgeting practices are credit positives.
  • The state's high pension and OPEB liabilities are a significant credit challenge.
  • KBRA recommends that the state maintain full actuarially determined pension contributions and support substantial operating reserves.

Statistics:

  • Per capita personal income in New Jersey is the eighth highest in the nation.
  • The state's unemployment rate is 4.7% (source: KBRA).
  • The state's debt-to-gross-state-product ratio is 22.3% (source: KBRA).
  • The state's operating reserves are 10.3% of total expenditures (source: KBRA).
  • KBRA expects the state to maintain a balanced budget and strengthen its financial position over the next few years.

Sources:

  • KBRA: KBRA Affirms A+ Rating for New Jersey's General Obligation Bonds
  • BusinessWire: KBRA Revises Rating Outlook for New Jersey Transportation Trust Fund Authority (NJTTFA)
  • Kroll Bond Rating Agency, LLC: About KBRA
  • KBRA: U.S. State General Obligation Rating Methodology