S&P Upgrades NJs Credit Outlook to Positive, So What?


On Friday, August 19, Governor Murphy and State Treasurer Muoio announced the decision by rating agency &P to upgrade the outlook for New Jersey’s general obligation bonds from stable to positive.

This is the second credit rating upgrade for the State of New Jersey since the Fiscal Year 2022 State Budget was enacted last year.

S&P noted that “New Jersey’s finances have shown a remarkable turnaround” and cited the State’s structural budget balance, strong unreserved fund balance, and “continued efforts to budget the full annual actuarially determined contribution (ADC) to its retirement systems.”

In addition to the general obligation bonds, S&P also assigned a “positive” outlook to various other bonds secured by annual state appropriations.

This upgrade to the state’s credit outlook shows that credit agencies are in alignment with Governor Murphy’s long-term plans for New Jersey’s economy.

What is a credit outlook?

According to S&P, an outlook indicates S&Ps view regarding the penitential for a rating change and its direction. In contrast to CreditWatch, an outlook generally is assigned as an ongoing component of long-term ratings, where appropriate, to corporate and government entities.

Credit outlooks have a longer time horizon than CreditWatch listings and incorporate trends or risks that it believes have less-certain implications for credit quality. The time frame for an outlook is generally up to two years for an investment grade and generally up to one year for a speculative grade.

The speculative-grade outlooks, a shorter time frame, reflect the nature of speculative-grade credits: they are more volatile and more susceptible to nearer-term refinancing risks, liquidity issues, and covenant triggers.

Governor Murphy was thrilled at the announcement, saying “We have come a long way from the days of missed or reduced pension payments, a startlingly low surplus, and ignored obligations. Not only have we gotten our fiscal house in order, we’ve fortified it and made good on our promise to taxpayers to strengthen the delivery of services and make New Jersey more affordable for everyone who calls it home.”

State Treasurer Muoio cited the state’s ability to make tough choices as a primary reason for the upgrade, saying, “We’ve made remarkable strides since the first days of this Administration. While we were buoyed by good fortune, we have been bound by smart choices. Together with our partners in the Legislature, we have reduced our bonded debt, built a strong, reliable surplus, and delivered what was once unrealistic – two consecutive record pension payments.”

See the press release issued by S&P Global Ratings.

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