Rating agencies are keeping an eye on New Jersey revenue collections as Treasury Department officials work on a potential $2 billion short-term line of credit, with proposals for such a facility due today by 3 p.m.

The Garden State is looking to access $2 billion in credit by July 1 to help it meet cash-flow needs until it issues its yearly tax and revenue anticipation notes in August or September. Declining revenue has limited New Jersey's fiscal flexibility, as a projected $1.2 billion deficit for fiscal 2009 may close out a roughly $700 million surplus and leave the state's coffers dry by June 30.

Analysts said they will continue to monitor the state's liquidity and cash-flow position.

"It's been a concern that we've addressed in our credit reports," said Moody's Investors Service analyst Mark Tenenhaus. "It's obviously an issue that we do watch [with] the state when it comes to that. It is specifically mentioned in our credit report, the last one that we did, as a factor."

New Jersey is looking to enter into a revolving credit agreement or similar loan facility, a capital markets transaction, or an alternative approach, according to the request for proposals. Officials expect to repay any funds drawn under the borrowing facility with proceeds from the upcoming Tran deal.

Obtaining a line of credit before issuing Trans is "pre-emptive" in the event that the state does need to find additional funds, according to Treasury spokesman Tom Vincz. Officials anticipate net interest costs on the short-term borrowing to be in the range of what the state pays on its Trans, which is an effective rate of 1.6%.

Moody's assigns its Aa3 rating with a stable outlook to New Jersey. Fitch Ratings and Standard & Poor's rate the credit AA-minus and AA, respectively, both with a stable outlook.

Earlier this month, the Office of Legislative Services announced that it expects the state to end fiscal 2009 with a revenue shortfall of more than $1.2 billion in comparison to the administration's projected surplus of $701.6 million. OLS budget and finance officer David Rosen and Treasurer David Rousseau will present their budget and revenue updates to the Assembly Budget Committee on May 19.

From July through March, total major revenue collections for the state have decreased by $1.67 billion to $15.51 billion in comparison to the same period in fiscal 2008.

"Obviously they are strained and this [RFP] is indicative of that stress," said Fitch analyst Ken Weinstein.

New Jersey isn't the only state looking for additional liquidity. California may need to borrow $17 billion to $23 billion for fiscal 2010 if voters fail to approve on May 19 budget initiatives that would help close a $40 billion deficit, according to the state's Legislative Analyst's Office.

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