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.
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