Standard & Poor's Rating Services said it has placed its ratings on New Jersey's general obligation, appropriation-backed, and moral obligation debt on CreditWatch with negative implications, which means that it could lower the rating within the next 60 to 90 days depending on the outcome of the state's budget deliberations and other developments.
This action is based on what a large and growing structural budget imbalance, increased reliance on one-time measures, which are becoming less conventional with long-term implications for the state's liability profile, and ongoing budgetary, liquidity, and pension funding pressures.
This action follows the state's announcement of a larger than previously anticipated revenue shortfall for the current year and the governor's decision to balance the budget for fiscal 2014 and 2015 through the reduction of pension payments below the amount required by the state's pension reform law.
Also incorporated into the CreditWatch placement is the potential for increased short-term pressures should litigation over the changes to the pension payments result in liquidity pressures for the state in fiscal 2014 or 2015.
