Standard & Poor's Ratings Services revised its outlook on New Jersey's general obligation (GO), appropriation, and moral obligation debt to negative from stable. At the same time, Standard & Poor's affirmed its 'A' rating on New Jersey's GO bonds, its 'A-' rating on the state's appropriation-backed debt, and its 'BBB' rating on New Jersey's moral obligation debt. At the same time, Standard & Poor's assigned its 'A' rating and negative outlook to New Jersey's series T GO refunding bonds and its 'A-' rating and negative outlook to New Jersey Building Authority's series 2016A revenue refunding bonds.
"The outlook revision reflects our view of the significant long-term pressures the state is under related to its postemployment benefits and the potential for New Jersey's situation to worsen over the next year or two based on current litigation and proposed legislation," said Standard & Poor's credit analyst John Sugden. "It also reflects weakened pension funded levels due to pension underfunding and lower-than-assumed rates of return," he added.
The series T GO refunding bonds are being issued to refund various outstanding GO bonds for net present value savings. Savings will be taken mostly up front with approximately $9 million taken in this current fiscal year. The New Jersey Building Authority state building revenue refunding bonds, series 2016A, are being issued to take out and permanently finance the series 2013 bond anticipation notes and other bonds for net present value savings. The state building revenue refunding bonds are special obligations of the authority payable from lease rental payments made by the State of New Jersey pursuant to a master lease between the state and the authority. The lease rental payments are subject to appropriation by the New Jersey legislature.
