Gov.-elect Chris Christie has pledged to take a critical eye at future borrowing in New Jersey but transition team officials said certain bonding might be needed to help finance infrastructure improvements.
The state's bonded debt increased dramatically from 2002 to 2006 and historically lawmakers have used one-time revenue measures to help balance operating budgets.
The incoming governor ran on a campaign of fewer taxes, reduced state spending, and using pay-as-you-go financing for capital needs to improve the state's finances.
New Jersey's total outstanding debt is $33.87 billion, with long-term debt per capita totaling $3,894.13, according to the state's comprehensive annual financial report for fiscal 2008.
"Through several administrations, the state has used nonrecurring solutions to resolve budget gaps, leaving the state with a sizeable structural imbalance, one of the highest debt burdens, one of the lowest pension funded ratios and one of the highest post-retirement health insurance liabilities in the country," according to a Moody's Investors Service report regarding the New Jersey Transportation Trust Fund Authority, dated Dec. 23.
The transition team said the new administration will find a balance between holding back on borrowing for fiscal prudence and issuing bonds and notes to help finance important capital projects that would benefit the state in the long term.
"I don't think the gov.-elect is against all forms of financing," Robert Grady, a transition team official said in a phone interview last week.
"There's a long history in New Jersey and in all 50 states of financing projects that have a dedicated and predictable revenue source and that bonding to finance those projects is a prudent means of financing. So, I don't think he's saying we're going to outlaw debt. I think that he will watch the growth of debt and the burden it places on future generations, as he should, just as he seeks to restore fiscal balance."
New Jersey's bonded debt grew to $33.87 billion in fiscal 2008 from $15.23 billion in fiscal 2002, for an annual growth of 14.2%, while annual revenue and gross state product increased by 6.3% and 1.8%, respectively. Revenue totaled $46.61 billion in fiscal 2008, up from $32.33 billion in fiscal 2002, according the fiscal 2008 CAFR. Gross state product grew to $399.5 billion in fiscal 2008 from $357.9 billion in fiscal 2002.
Growth in net tax-supported debt has been essentially flat since fiscal year 2006, according to Moody's.
Moody's in early August revised New Jersey's outlook to negative from stable. The credit rating agency rates the state Aa3. Standard & Poor's and Fitch Ratings assign the state their AA and AA-minus ratings, respectively. Both agencies have stable outlooks for the credit.
Since winning the November election, Christie and the transition team have met with Moody's to begin a dialogue with the credit rating agency.
"The gov.-elect wanted them to know that, first of all, you have a gov.-elect that is personally committed to restoring fiscal balance in New Jersey," Grady said. "And second of all, he personally wanted to hear from the rating agencies themselves, those factors that would lead to improvement in our credit outlook and those factors that would lead to denigration in our credit outlook. And so I think that's a good step to show that he's attentive to our credit posture."
