(Bloomberg) -- The political party running New Jersey has changed, but the financial problems squeezing the Garden State haven't.
The $37.4 billion budget released by Democratic Governor Phil Murphy “does not significantly change” New Jersey's financial outlook, despite a slight improvement to its deeply underfunded retirement system, according to S&P Global Ratings.
While its pensions by July 1 had enough saved to cover about 35.8 percent of the benefits that have been promised, up from 30.9 percent a year earlier, the company said that's still below an acceptable threshold. And the Democrat's plan will continue New Jersey's long, bipartisan tradition of shortchanging the retirement system -- the consequences of which caused a record number of downgrades under former Republican Governor Chris Christie.
“Governor Phil Murphy's fiscal 2019 budget proposal does not significantly change S&P Global Ratings' view of credit quality, as the governor's pension funding proposal represents a continuation of the previous administration's pension funding policy,” S&P credit analyst David Hitchcock wrote in a report released Monday
S&P ranks New Jersey as A-, seventh-highest investment grade and lower than any other state except Illinois. Moody's Investors Service also rates it seventh-highest, while Fitch Ratings has it one step higher. All assigned stable outlooks.
Though the pension contribution for the fiscal year that starts July 1 would be a record $3.2 billion, or 28 percent higher than the current year, it's still barely over half what actuaries say is needed, according to the report. Even if Murphy, a Democrat, were to fund a five-year contribution increase to reach that ideal level, liabilities would stay high and ratios low “for some time,” according to S&P.
To contact the reporter on this story: Elise Young in Trenton at eyoung30@bloomberg.net.
To contact the editors responsible for this story: Flynn McRoberts at fmcroberts1@bloomberg.net, William Selway, Michael B. Marois
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