New Jersey Governor Chris Christie's recently presented proposed $32.9 billion budget for fiscal 2014 poses some concerns, says a Standard & Poor's Ratings Services commentary published Wednesday.
In the commentary, "New Jersey's 2014 Proposed Budget: Structural Balance Remains Elusive," Standard & Poor's flags some areas that could create challenges for the state. Key concerns regarding the fiscal 2014 budget are: a fiscal 2014 revenue forecast that is built on fiscal 2013 revenue targets that, based on our analysis, could be challenging to meet even after recent downward revenue revisions; the uncertain timing and financial impact of Superstorm Sandy recovery efforts; the federal funding flow and the general economic impact of federal fiscal consolidation efforts; a still-uncertain macroeconomic environment; reliance on new and untested revenues; and potential implementation risks and added cost pressures associated with health care reform efforts.
"These are significant issues for New Jersey given the state's limited financial flexibility and high fixed costs related to debt and postretirement liabilities," said Standard & Poor's credit analyst John Sugden.
"We recognize that there is the potential that above-average income tax collections in fiscal 2013, coupled with a very aggressive reconstruction effort, could provide some upside to the revenue forecast. However, in our view, future budgets could be pressured, absent sustainable economic growth, as fixed costs continue to climb and the revenue impacts of one-time economic events fade," Sugden added.
