Fitch Ratings revised its outlook to negative from stable on New Jersey's general obligation and related debt and affirmed its AA-minus rating on the state's GO bonds.

Fitch has become negative because of the state's ongoing budget strains, insufficient economic growth, and expectations of growing long-term liabilities pressure, Fitch analyst Marcy Block said March 21.

Net tax-supported debt as of June 30, 2013 was 7.6% of 2012 personal income, compared with a Fitch-rated state median of 2.7%.

The state's unfunded pension liabilities are also well above average, Block said. While the state has approved a plan to ramp up to fully actuarially required pension levels, the state's liabilities to its pension plan a still growing.

The state is currently spending about $1.6 billion this fiscal year or about 4.8% of its budget on supporting its pension obligations. To meet the actuarially required pension level it would have to spend 11% of the budget on these obligations.

Block said she expects the planned increases in pension funding along with expected increases in Other Post-Employment Benefits will strain the state's operating budget.

Block also noted that the state's economic performance since the Great Recession has lagged that of the nation.

New Jersey's budget is structurally imbalanced and the state has maintained minimal cash balances in recent years, Block said.

On the positive side of the ledger, the state has a wealthy populace and a diverse economy. The governor has strong powers to reduce spending.

Along with affecting the state's $2.4 billion outstanding GO bonds, Fitch's negative outlook affects $993 million in Garden State Preservation Trust revenue bonds, $740 million in New Jersey certificates of participation, $712 million in New Jersey Health Care Facilities Financing Authority appropriation bonds, $518 million in New Jersey Building Authority appropriation bonds and some other state securities.

Moody's Investors Service put a negative outlook on its Aa3 rating of New Jersey's GO and appropriation debt in December 2013.

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