Fitch Ratings announced it downgraded New Jersey's credit rating from "AA-" to "A+" Thursday.
The downgrade affects New Jersey's $2.4 billion in outstanding general obligation debt and about $32 billion in securities linked to that debt.
In a statement announcing the decision Fitch attributed the downgrade to several key factors. Specifically, Fitch cited "ongoing budget strain created by overly optimistic revenue forecast,""long-term spending pressures," a lack of liquidity and what it described as New Jersey's "repeated reliance on one-time solutions to achieve budgetary balance." Overall, Fitch described New Jersey's budget as "structurally imbalanced."
New Jersey Gov. Chris Christie has made improving New Jersey's economy and, specifically, pension reform, one of the main focuses of his administration. In a speech late last month, he warned a budgetary "disaster" was looming in the state.
Fitch noted that, in spite of Christie's pension reform efforts, unfunded liabilities were still a key concern in New Jersey because the current pension funding schedule includes phasing out the prior levels of funding over seven years, which will result in "sizeable, planned increases in annual pension contributions."
"Fitch believes that meeting the requisite increases in pension contributions will continue to be challenging and is likely to conflict with other long-term demands, such as infrastructure needs, property tax relief, and school funding," Fitch's statement said.
Christie's office did not immediately respond to a request for comment about the downgrade from Business Insider Thursday.
Update (2:20 PM): Christie's office referred Business Insider to New Jersey's Department of Treasury, which provided the following statement about the downgrade:
"The Fitch release follows the Administration’s announcement this week that it will take any and all actions necessary to offset revenue shortfalls to achieve a balanced budget as constitutionally required. This is not a New Jersey-specific problem, as many other states that are heavily dependent on income taxes, including Connecticut, Pennsylvania, Kansas and Michigan, face shortfalls of similar or even greater magnitude that defied predictive analysis.
Volatility in income tax collections for 2013 'created challenges for officials in many states to forecast income taxes accurately,' according to a report issued this week by The Nelson A. Rockefeller Institute of Government, a national non-partisan public policy think-tank, which attributed the impact on states to the lingering effects of the 2013 'Fiscal Cliff' and expiration of lower federal tax rates. As Governor Christie said this week, all options are on the table. We are currently working to identify potential options, and the Governor will work with the Legislature to achieve a balanced budget."