New Jersey receives 4th credit rating upgrade in a month

Matthew Fazelpoor//May 2, 2023//


New Jersey receives 4th credit rating upgrade in a month

Matthew Fazelpoor//May 2, 2023//

Listen to this article

The run of ratings upgrades continues in the Garden State, as Kroll Bond Rating Agency (KBRA) announced May 1 it was boosting New Jersey’s credit rating from A to A+.

The upgrade is the fourth for the state in just the past month, coming on the heels of similar announcements from Moody’s Investor Service, S&P Global Ratings and Fitch Ratings, which each upgraded New Jersey’s general obligation bonds in April. It also marks the seventh rating upgrade New Jersey has received in the past 14 months.

This is KBRA’s first upgrade of the state’s rating since beginning coverage in 2015. The agency cited the proposed record surplus and recent full pension payments as reasons for the upgrade.

“The rating upgrade for the state’s General Obligation Bonds recognizes the state’s return to full actuarial pension contributions in FY 2022, following more than two decades of underfunding, as well as the accumulation of record reserves. These achievements are somewhat offset by the state’s issuance of deficit financing bonds to bolster liquidity and balance the FY 2021 budget, as well as the role of non-recurring pandemic-related federal aid in the state’s improved financial position,” KBRA wrote in its analysis. “Nevertheless, the state has demonstrated a recent commitment toward restoring and maintaining actuarially sound annual pension contributions and has dedicated budgetary windfalls toward paying down long-term liabilities and bolstering reserves rather than toward recurring spending, which has supported its financial flexibility.”

KBRA also boosted the outlook from positive to stable.

The agency says the rating actions reflect the following key credit considerations:

Credit Positives
  • State economic base is large and diverse. Per capita personal income is the fourth highest in the nation.
  • Governor has broad executive powers under the New Jersey Constitution to adjust the budget and reduce spending to maintain budget balance.


Credit Challenges
  • The ability to maintain balanced operations and satisfactory reserves will be challenged by the loss of one-time federal revenues available to bolster finances through the pandemic.
  • Unfunded pension and other post-employment benefits (OPEB) liabilities are very high relative to personal income and gross state product.
  • Expiration of a 2.5% surcharge on corporate business tax (CBT) at the end of CY 2023 is expected to reduce annual revenues by $323 million in FY 2024 and nearly a billion each year thereafter when fully phased out and could challenge structural budgetary balance.


“The current administration has placed a high priority on improving the state’s overall fiscal health and current reserve levels provide a large cushion to manage future budgetary challenges,” KBRA added in its report.

Gov. Phil Murphy says that this upgrade from KBRA makes a grand slam for New Jersey’s bond rating.

“And is proof positive that our efforts to budget responsibly have paid off,” said Murphy in a press release. “A lot of hard work has gone into this series of upgrades, and we are well-prepared to weather any storms.”

“The latest upgrade is further recognition that the work we have put into responsible budgeting, including record pension payments and an unprecedented level of surplus, has been noticed, and we’re gratified that the ratings agencies have acknowledged these actions,” said Treasurer Elizabeth Maher Muoio.