New Jersey debt downgraded over pension hole

  • By: Raquel Pichardo-Allison
  • 18 Aug 2011
  • Be the first to comment
  • Print
  • Send
us-dollar

US – Fitch Ratings has downgraded New Jersey’s debt rating in large part because of its swelling pension funding needs.

Fitch downgraded the state's general obligation bonds to AA- from AA.

"The downgrade... reflects the mounting budgetary pressure presented by significant and growing funding needs for the state's unfunded pension and employee benefit liabilities, particularly in the context of a weak economic recovery, a high debt burden, limited financial flexibility, and persistent structural imbalance," Fitch said.

New Jersey has put in place a series of pension reforms including increased employee contributions and a plan to phase in the state's full contribution amount over the next seven years. While these measures will slow the deficit growth, they will also put a strain on the state budget, Fitch said.

"Fitch believes that meeting the requisite increases in pension contributions will be challenging and is likely to conflict with other long term challenges, such as property tax relief, school funding, and infrastructure needs," Fitch said.

Fitch is the last of the three ratings agencies - including Standard & Poor's and Moody's - to downgrade New Jersey's rating.

Visitors comments

Get the latest news direct to your inbox.

Pensions library

a-guide-to-pensions-stability-cover-page

A guide to Pensions Stability

 

This guide to Pensions Stability explores the new financial and operational model for defined benefit (DB) pension schemes. Pension schemes are still being run with far greater risk than is necessary and there is an opportunity to create a more stable pensions environment for trustees and sponsors.

joint-institute-pensions-survey-2014-imageset

Joint institute pensions survey 2014

 

This inaugural survey among 326 members of the Chartered Institute of Personnel and Development (CIPD) and the Pensions Management Institute (PMI) asked whether auto-enrolment will deliver on its goals; if contribution rates for employees and employers need to rise; and whether pensions tax relief needs further reform.

Job of the week

Events

event_image

Workplace Savings and Benefits Awards

11 Sep 2014

London, UK

event_image

Defined Contribution Conference 2014

17 Sep 2014

London, UK