Moody’s Investors Service changed New Jersey’s outlook to negative from stable, citing a structural deficit, the end of federal stimulus funds, and the state’s unfunded retirement costs.

Moody’s rates New Jersey’s $31.6 billion of outstanding general obligation and appropriation debt Aa2. The rating agency earlier this year recalibrated the state’s credit rating to Aa2 with a stable outlook from Aa3 with a negative outlook.

The outlook change announced Wednesday is partly due to ongoing structural deficits. Gov. Chris Christie closed a nearly $11 billion fiscal 2011 budget gap by skipping a $3 billion payment to the state’s pension fund. The budget also reduced municipal and school aid and suspended property-tax rebates for most homeowners. Fiscal 2011 began July 1.

New Jersey’s Office of Legislative Services anticipates a $10.47 billion deficit for fiscal 2012. The state will not have the benefit of stimulus funds to help balance next year’s budget.

Moody’s said: “The assignment of a negative outlook reflects our belief that the state will be challenged to fund its structural budget gap, particularly in light of its failure to fund pension contributions in the 2010 and 2011 budgets and the expiration of federal stimulus funding in fiscal 2012 as well as our expectation that New Jersey’s economic recovery will be slow.”

Beginning in fiscal 2012, the state will begin a seven-year ramp-up to making full contributions to its pension system. Next year’s spending plan must include one-seventh of the state’s total pension obligation, or about $512 million, according to Senate Democrats.

While that will help tackle the $46.8 billion unfunded pension liability, it will place additional strain on the operating budget to meet those mandatory payments.

The outlook change comes as the state plans to sell $664.5 million of GO refunding debt Sept. 30 that will restructure previous bonds and extend debt-service payments due this year into future years. Morgan Stanley is the book-runner.

Officials anticipate the refunding will create $175 million of debt-service savings in fiscal 2011. The deal includes $490 million of Series 2010Q bonds maturing from 2013 to 2021, $92.7 million of Series 2010R taxable bonds maturing in 2014 and 2015, and $81.8 million of Series 2010S bonds maturing in 2013, 2016 and 2017, the preliminary official statement said.

Fitch Ratings and Standard & Poor’s both rate the refunding AA with a stable outlook.

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