The third major credit-rating agency has downgraded its outlook for the state of New Jersey.
Moody’s Investors Service has reduced New Jersey debt to an A1 rating, making it the second-weakest state in the country, according to Moody’s calculations.
With about six weeks to go in this budget year, New Jersey has an $800 million revenue gap. That, plus years of an underperforming economy and growing pension costs led Moody’s to downgrade the state’s rating this week, said Moody’s senior analyst, Baye Larsen.
“These pension contributions have been absorbing large portions of the revenue growth that the state has seen, leaving very little capacity for natural budget growth of all of their other spending areas,” he said.
The state has repeatedly fallen short of expected revenue targets that Larsen says were too optimistic.
The lower rating will make it more expensive for the state to borrow money. It follows similar downgrades by Fitch Ratings and Standard & Poor’s.