Moody's Ratings upgraded New Jersey to Aa3 from A1 Wednesday.
The rating agency cited the Garden State's budget surplus and pension contributions, powering it to a second upgrade in two months, after S&P Global Ratings raised the state to A-plus in August.
"New Jersey's Aa3 issuer rating is supported by maintenance of financial reserves sufficient to absorb adverse economic impacts, combined with growing tax revenue, which will help the state extend its positive liability management trends," Moody's analysts wrote in the rating report.
"Today's announcement by Moody's demonstrates our commitment to reversing decades of fiscal mismanagement," Gov. Phil Murphy said in a press release. "We have made difficult decisions that prioritized a strong, reliable surplus and delivered five consecutive full pension payments. While there is more work to be done in the future, these tough decisions have put us on a long-term path to financial stability."
New Jersey had a history of high debt burdens and
The state has also defeased around $4 billion of debt since 2021 while avoiding new issuance by funding infrastructure projects with cash, according to the rating report.
Moody's analysts say New Jersey is well-positioned to continue making pension contributions.
"The state's undesignated fund balance is projected at $6.75 billion, or almost 12% of appropriations, for fiscal year end. Although it has decreased from a fiscal 2023 peak, this surplus will allow the state to continue the sound pension contribution practices," the report said. "Even so, retirement benefit underfunding will remain a bigger challenge for New Jersey than for the vast majority of states, limiting its fiscal flexibility."
Murphy, who is term-limited and will leave office at the end of the year, stressed his focus on fiscal policy in his final budget address in February.
"When I entered office, we inherited a budget with a paltry $400 million surplus," Murphy said in his Feb. 25 speech. "But, with our final budget proposal, we are going to make sure we leave the next governor a surplus that is more than 15 times greater."
"With this ninth credit rating upgrade in just over three years, we have further reversed the trajectory of the previous decades of downgrades, and again have independent confirmation that we are leaving the state better positioned to meet its financial obligations and future challenges," State Treasurer Elizabeth Maher Muoio said in a statement Wednesday.
New Jersey will be strained by federal policy decisions, Moody's analysts wrote, but the state's wealth and education levels, as well as its strong economic performance relative to its peers, will "lend support during a period of disruptive federal policy changes affecting trade and employment."
Along with New Jersey's Aa3 issuer default and general obligation bond ratings, Moody's upgraded the state's Garden State Preservation Trust Open Space and Farmland Preservation bonds to Aa3, multiple state aid intercept and enhancement programs to A1, and its appropriation bonds and South Jersey Port Corporation marine terminal revenue bonds to A2.
The rating outlook, previously positive, is now stable at the new rating.
