S&P May Downgrade New Jersey Again Over Pension Funding

0
S&P May Downgrade New Jersey Again Over Pension Funding

According to aiCIO magazine, credit rating agency Standard & Poor’s was not happy with Republican Governor Christie’s recent decision not to fund the state’s public employees’ retirement system as he had promised. Standard & Poor’s announced yesterday that Christie’s decision to not make promised payments to the pension fund could result in another downgrade of the state’s credit rating.

New Jersey’s public employees’ retirement system is currently underfunded to the tune of more than $47 billion.

Hayden Capital 2Q22 Performance Update

unnamed 12Hayden Capital's performance update for the second quarter ended June 30, 2022. Q2 2021 hedge fund letters, conferences and more Dear Partners and Friends, The markets continued to sell-off in the second quarter, especially for internet-based businesses.  This year continues to be the toughest stretch for us, since the Hayden’s inception.  Inflation concerns and the Read More

Broken commitment from New Jersey’s Governor Christie

Last year, both Governor Christie and New Jersey State Senate President Stephen Sweeney went on record as fully committed to a $3.8 billion dollar combined payment to the state’s pension funds in 2014. However, after hedging on the question for the last couple of months, Christie announced recently that he would reduce two payments to New Jersey’s public workers’ pension fund from $3.8 billion to $1.38 billion due to budgetary constraints.

Statement from S&P

The S&P analysts laid out their perspective on Christie’s decision in a press release yesterday. “The governor’s decision to delay pension funding, while providing the necessary tools for cash management and budget control, has significant negative implications for the state’s liability profile.”

“We believe the state’s decision to reverse course on its pension reform is the result of a revenue forecast that is not aligned with current economic conditions in the state, rapidly growing fixed costs, and limited flexibility with which to address any significant deviations from the forecast,” the analysts continued, also mentioning they had placed New Jersey on “CreditWatch with negative implications.”

They also pointed out the state was in effect kicking the can down the road. “By using bullish assumptions about revenue growth and one-time measures to close budget gaps, the state defers making long-term structural changes to better align revenues and expenditures, pushing budgetary pressures to future years’ budgets and increasing its exposure to an eventual economic downturn.”

Possible state government shutdown?

Christie’s decision to not make the promised pension fund payments might have further ramifications. A couple of months ago, New Jersey State Senate President Stephen Sweeney told the Star-Ledger he was willing to shut down the state government if Governor Christie didn’t make the payment into the public employee pension fund they had both promised during an overhaul of the structure of the pension plan three years ago.

Updated on

No posts to display