DOW JONES NEWSWIRES
Fitch Ratings cut its ratings on New Jersey's bonds by one notch Wednesday, saying the state's budget faces growing funding needs to meet pension and worker-benefit liabilities.
The ratings company said the pressure is exacerbated by New Jersey's weak economic recovery, high debt burden, limited financial flexibility and persistent structural imbalance.
Fitch now rates New Jersey's bonds at double-A-minus, three steps below the highest credit-quality rating of AAA. The outlook was revised to stable. The ratings company had lowered its outlook on New Jersey to negative in April.
Fitch projected funding levels would continue to deteriorate through the medium term despite recent efforts to limit growth in pension liability. Fitch said as the full funding of actuarially required pension contributions is phased in, the higher contributions likely would conflict with other long-term challenges, like property tax relief, school funding and infrastructure needs. The ratings company expects state reserve balances to remain narrow, offering limited flexibility for shocks.
However, it noted New Jersey benefits from a wealthy population and a broad and diverse economy.
