S&P raises New Jersey bond outlook to positive from stable on improved pension funding
New Jersey’s outlook for its general bonds was raised from stable to positive on Friday by S&P Global Ratings, in part due to improved funding for the state pension system.
“The outlook revision follows the second consecutive year the state has budgeted for the full annual actuarially determined contribution to its pension systems,” S&P Global Ratings credit analyst David Hitchcock said in a statement. Friday press release.
S&P maintained its A- rating on general government bonds.
For the year ended June 30, the state’s contribution to the pension system was approximately $9.1 billion, a combination of general revenue and proceeds from the state lottery, which is an asset of the retirement system. For the fiscal year that began July 1, the state’s total payment will be $6.82 billion.
“In addition to high pension liabilities, the state will also continue to face pressures from its high debt and other post-employment benefit (OPEB) liabilities, despite strong recent financial performance,” the statement said. Press. “Accumulated pension and OPEB liabilities, along with high debt, create significant annual costs that could put pressure on future budgets in the event of an economic downturn.”
Government bond ratings remain under pressure as ‘until recently (the government had) a history of minimal fund balances and large structural budget deficits when reviewing pension contribution shortfalls’ , said S&P, adding, “We believe these conditions could recur in an economic downturn.”
According to the latest data, the New Jersey Pension Fund, Trenton, had $91.5 billion in assets as of May 31, the 11th month of the previous fiscal year. The unaudited net return for the first 11 months of this fiscal year was -2.86% versus a benchmark of -1.04%.