Moody’s Investors Service on Wednesday upgraded New Jersey’s general bond rating from A3 to A2 due to “the state’s continued trends toward strong revenue and liquidity and its steps to more aggressively address liability burdens, including the completion of a debt reduction program and increased pension contributions.” ‘ the rating agency said in a press release.
The agency also warned as a precaution. “Despite the state’s diverse economy and rich tax base, it retains pension liabilities that are among the largest of the 50 states and will represent recurring fiscal pressures and increase the state’s vulnerability to financial market downturns,” the press release said.
Factors that could lead to a future rating upgrade include, but are not limited to, a “developed strategy to ensure full funding of pension contributions on an ongoing basis” and “maintenance of fiscal balances and liquidity above historical averages (and) relatively stable debt and pension ratios, and fixed cost increases that remain affordable,” says the press release.
Rating downgrades could occur if, among other things, “pension contributions are reduced to a level that falls short of previously established targets” or “there is significant growth in unfunded pension liabilities or other debt that increases fixed costs,” the report said news release said.