New Jersey’s credit rating has been cut again, making this the 11th time since Gov. Christie took office. The rating drop from Moody’s Investors Service, from A2 to A3, was based on the state’s poorly managed budget, the sluggish economy, and high amount of debt, thanks in large part to its ever-increasing unfunded pension liability—more than $100 billion, according to the most stringent accounting standards. As a result, it is getting more expensive to borrow money for big public projects, costing taxpayers even more money.
The downgrade comes on the heels of legislation that was implemented in 2016 to change certain state taxes. In exchange for hiking the gas tax by 23 cents to fund state transportation projects, the estate tax will be phased out over the next several years while the sales tax was immediately reduced by three-eighths of a penny. Unfortunately, Moody’s estimated the new changes will eliminate $1.1 billion in revenue by 2021.
Meanwhile, New Jersey’s pension debt continues to balloon, despite Christie’s efforts to ramp up contributions to fully fund the system over the next decade. His latest proposal is to implement a change to the state lottery system that would reroute $1 billion in annual revenue to the pension system. Details on how the change would work, as well as how the general fund would cover the programs currently paid for by the lottery, are still unclear, however.
