[toc]The credit ratings companies probably don’t have a sense of humor about their task. But it’s at least slightly ironic that the state of New Jersey got a credit rating downgrade, soon after Atlantic City got an upgrade.
NJ’s credit downgrade
Here’s what Moody’s Investors Service had to say about its downgrade of New Jersey:
Moody’s Investors Service has downgraded to A3 from A2 New Jersey’s general obligation rating. The ratings on the state’s appropriation-backed debt, other GO related debt, moral obligation debt, intercept programs and certain special tax bonds that require state appropriation have also been downgraded by one notch. The downgrade affects approximately $37 billion of rated debt. The outlook on the state’s ratings has also been revised to stable.
The downgrade to A3 reflects the continued negative impact of significant pension underfunding, including growth in the state’s large long-term liabilities, a persistent structural imbalance, and weak fund balances. Despite the state’s significant increases in pension contributions since fiscal 2012, contributions remain well below the actuarial recommended contribution and unfunded pension debt continues to grow.
The A3 rating certainly isn’t bad — it’s still in the “prime” category. But according to Reuters, it’s the “11th time Wall Street has downgraded the state’s bonds since Governor Chris Christie took office in January 2010.”
Downgrade comes as New Jersey tells AC how to manage its finances
New Jersey’s latest downgrade came just a couple of weeks after AC’s credit upgrade.
The upgrade, of course, is at least partially due to New Jersey’s takeover of the city’s finances. (City officials would probably argue they could have done just as good of a job, if left to their own devices.)
At the same time, it’s possible to see some irony in the fact that New Jersey is trying to tell AC how to fix things. The state’s fiscal situation becomes more untenable with every passing day.
The state is also paying to run AC
Last week, the amount of money that NJ pays to have a third party guide the finances of Atlantic Citywas released.
The pricetag for the first few months of oversight came out to roughly $100,000 a month. Of course, if New Jersey is actually making things better in AC — which it appears to be doing — that is an affordable bill.