Agency raises New Jersey bond rating, citing pension payments and budget management
Upgrade could lower borrowing costs, though agency still flagged high pension and retiree health benefit liabilities
The Kroll Bond Rating Agency has raised New Jersey’s general obligation bond rating from A+ to AA-, citing the state’s recent history of fully funding its required pension contributions, reducing long-term liabilities, and improving its budget management.
The Sept. 2 upgrade is the highest rating KBRA has given New Jersey since it began rating the state in 2015. The agency also upgraded several types of state appropriation-backed debt from A to A+ and assigned the ratings a stable outlook.
Higher credit ratings can allow the state to borrow money at lower interest rates, potentially reducing costs for taxpayers.
New Jersey’s KBRA rating is now one step above the state’s A+ ratings from S&P Global Ratings and Fitch Ratings and equivalent to its Aa3 rating from Moody’s Investors Service.
The Treasury Department said it was the first credit-rating increase during a New Jersey governor’s first year in office. It was also the state’s 10th consecutive upgrade among the four rating agencies since pandemic-era downgrades in 2020.
Gov. Mikie Sherrill called the upgrade recognition of the fiscal decisions made during her first seven months in office, including approving a full pension contribution and maintaining a projected $6 billion surplus.
But the fiscal record cited by KBRA spans multiple years and administrations. Sherrill’s fiscal year 2027 budget includes New Jersey’s sixth consecutive full actuarially required pension contribution. The first five were approved under former Gov. Phil Murphy.
KBRA also cited a projected year-end surplus equal to 10% of state appropriations and New Jersey’s large, diverse economy as financial strengths.
The agency warned, however, that New Jersey’s unfunded pension and retiree health-benefit obligations remain very high relative to residents’ income and the state economy. It also said the state could face challenges as it moves away from the unusually large reserves accumulated during the pandemic.
Krystal Knapp is the founder, executive director, and publisher of The Jersey Vindicator and the founder of Planet Princeton. She has more than two decades of experience reporting in New Jersey, including 10 years at The Trenton Times, where she was the newsroom’s public records and computer-assisted reporting expert. Her work has been recognized by the New Jersey Press Association and the Center for Cooperative Media. You can reach her at Krystal AT jerseyvindicator.org.