The state’s massive unfunded pension liability could deliver a considerable blow on the state’s economy in the event of a recession, and still presents a major obstacle for reversing its credit downgrades, according to a recent S&P Global analyses of the 2020 budget.

“New Jersey’s inability to contribute full pension annually determined contribution after 10 years of national economic recovery raises questions about what could happen in another recession,” reads the report.

Lawmakers and Gov. Phil Murphy agreed to a $38.7 billion budget on June 30, which sets aside $401 million for the rainy day fund—the first payment since the Great Recession over a decade ago.

Part of the budget Murphy signed also includes a $3.8 billion pension payment – the largest to date, but still only 70 percent of what the state should be paying. The full amount would not be reached until 2023.

“The record national economic expansion has helped New Jersey achieve its current contribution percentage, but reaching its full [annually determined contribution] funding might prove difficult if a recession intercedes between now and 2023,” the report reads.

The administration argued that the rainy day fund will help reverse its trend of an 11-credit downgrade by the three major Wall Street rating agencies.

But that infusion of funds by itself is “only adequate, and not in itself a reason for an upgrade to a higher rating from our current rating,” said David Hitchcock, a senior director at S&P.

The state’s public worker retirement liability is unfunded by upward of $100 billion by some estimates and has been the source of its 11-time credit downgrades by S&P and the two other major Wall Street rating agencies: Moody’s and Fitch.

“This latest analyses recognizes the administration’s commitment to bolstering New Jersey’s pension fund, as well as our sizable savings initiatives, which have created more budget flexibility,” Matthew Saidel, a spokesperson for the governor’s office, said in a statement. “Gov. Murphy is committed to addressing the underfunding and broken promises of previous governors and legislative leaders in both parties.”

Legislative leadership argued that the pension obligations have been the main source of fiscal woes and that putting money into a rainy day fund “lockbox” – meaning it cannot be taken out – would be inappropriate, given the state’s many bills to be paid.

Lawmakers, in turn, proposed a $1.4 billion surplus, where the administration would be free to use the money for a variety of different expenses, including the movement of money into the rainy day fund. Murphy ultimately scuttled the idea.

To clamp down on future pension costs, Senate President Stephen Sweeney, D-3rd District, unveiled two proposals last year to cut retirement and health care for public workers.

One would create a hybrid of a 401k-style retirement plan and a defined pension plan, while another would move health care coverage from the equivalent of a platinum level of coverage under the Affordable Care Act to a gold level of coverage.

Those two controversial proposals would likely be put before voters as a ballot question in the 2020 general election, rather than move through the Legislature only to be vetoed by Murphy who has remained at best frosty about them.

“Savings from structural reforms will help us contain costs over the long-term, however, if we hit an economic downturn, and revenues plummet while social service needs rise, we will need real surplus revenues to weather the storm,” Saidel added of the analyses.