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The basics:

• Moody’s upgrades New Jersey’s credit rating
• State maintains robust surplus and full pension contributions
• Ninth credit rating upgrade under Murphy administration
• S&P Global also raised NJ’s rating to A+ in August

The Garden State has received another credit rating upgrade – this time from Moody’s Ratings.

Moody’s announced Sept. 17 it upgraded the rating on New Jersey’s general obligation bonds from A1 to Aa3 while also revising the outlook from positive to stable.

“The upgrade was driven by the state’s ability to maintain a comparatively robust budgetary surplus through the current fiscal year even while providing full actuarial pension contributions and meeting education aid and other spending commitments,” the credit rating agency stated in its analysis.

Moody’s noted that the state’s maintenance of a surplus sufficient to absorb any economic downturns – combined with growing tax revenue – support the credit rating.

“New Jersey is in its fifth consecutive year of full actuarial pension contributions, and also has defeased about $4 billion of debt while avoiding an approximately equal amount of new issuance by cash funding infrastructure projects since fiscal 2021,” said Moody’s. “The state’s undesignated fund balance is projected at $6.75 billion, or almost 12% of appropriations, for fiscal year end (June, 30, 2026). Although it has decreased from a fiscal 2023 peak, this surplus will allow the state to continue the sound pension contribution practices.

“Even so, retirement benefit underfunding will remain a bigger challenge for New Jersey than for the vast majority of states, limiting its fiscal flexibility. Federal policy changes will accelerate already rapid expense growth in health care, as in many other states. New Jersey’s high wealth and education levels, and its recent trajectory of strong economic performance compared with regional peers, will lend support during a period of disruptive federal policy changes affecting trade and employment.”

‘Independent confirmation’

New Jersey last received an upgrade from Moody’s in April 2023 – from A2 to A1. You can read the credit agency’s full analysis here.

The upgrade is the state’s ninth during the Murphy administration. It comes on the heels of an August upgrade by S&P Global Ratings from A to A+.

“Today’s announcement by Moody’s demonstrates our commitment to reversing decades of fiscal mismanagement,” said Gov. Phil Murphy. “We have made difficult decisions that prioritized a strong, reliable surplus and delivered five consecutive full pension payments. While there is more work to be done in the future, these tough decisions have put us on a long-term path for financial stability.”

While there is more work to be done in the future, these tough decisions have put us on a long-term path for financial stability.
— Gov. Phil Murphy

State Treasurer Elizabeth Maher Muoio said this ninth credit rating upgrade – in just over three years – reverses the trajectory of the previous decades of downgrades. She says this upgrade provides independent confirmation that the Murphy administration has positioned the Garden State to meet its financial obligations and future challenges.

Muoio said, “As we approach the final months of Gov. Murphy’s administration, it is extremely gratifying to receive yet another vote of confidence from industry giant Moody’s that our tireless efforts over the years – including making our pension payments, building our surplus, and reducing our bonded debt – have helped us to significantly strengthen and improve our state’s fiscal health – a core mission of this administration.”