New Jersey Debt Watch

[campbell]

Yeah, I think it's time.

http://ai-cio.com/channel/RISK_MANAG..._Pensions.html

A credit rating agency has warned the governor’s actions on pension reform could hit its assessment of the Garden State—again.
(June 3, 2014) -- Tinkering with New Jersey public pension system could result in another downgrade, ratings agency Standard & Poor’s (S&P) announced yesterday, barely two months since it last took action on the state’s ranking.

The rating agency took a dim view of Republican Governor Christie’s apparent about-face and decision not to fund the state’s public employees’ retirement system, which has a liability of around $47 billion.

“The governor's decision to delay pension funding, while providing the necessary tools for cash management and budget control, has significant negative implications for the state's liability profile," S&P analysts said.

......
In April, S&P, quickly followed by peers Moody’s and Fitch Ratings, downgraded the state to A+. This is the lowest rating given to any state and is shared by California and Illinois, which each have liability problems of their own.

A further downgrade would make New Jersey the lowest rated state in the US, which could have implications on its ability and costs to borrow.

"By using bullish assumptions about revenue growth and one-time measures to close budget gaps, the state defers making long-term structural changes to better align revenues and expenditures, pushing budgetary pressures to future years' budgets and increasing its exposure to an eventual economic downturn," the analysts wrote.

In January New Jersey State Senate President Stephen Sweeney told the Star-Ledger newspaper he was prepared to shut down state government if Governor Chris Christie did not support the payment into the public employee pension fund they had both promised when approving a major overhaul of the programme three years earlier.

[campbell]

http://www.statedatalab.org/state_da...ail/new-jersey

According to analysis by Truth in Accounting, New Jersey does not have enough assets available ($26.3 billion), to pay the state's bills, ($131 billion). The difference between assets and bills is $104.7 billion. That debt divided by the number of taxpayers reveals New Jersey's per-taxpayer burden of $34,200 in 2012. Only eight states--Alaska, North Dakota, South Dakota, Iowa, Tennessee, Utah, Nebraska, and Wyoming--achieved a per-taxpayer surplus in 2012.

New Jersey missed the 180 day goal time between the close of its fiscal year and release of its 2012 Comprehensive Annual Financial Report (CAFR), publishing the report 193 days after the fiscal year-end. The timeliest states- Utah (111 days), Washington (138), and Michigan (151)- published their CAFRs well before the 180 day deadline. The worst state, New Mexico, took 426 days, over a year after fiscal year end, to publish its CAFR.

.....
New Jersey is a Sinkhole State, one of the five worst states in its per-taxpayer burden for the fiscal years 2009, 2010, 2011, and 2012.New Jersey's per-taxpayer burden decreased significantly to $34,200 in 2012. The state's rank remained at 47th. Outbound moves from New Jersey in 2012 were 62.3% of total moves, reflecting business and citizen concerns about the state's economic health.New Jersey's financial reports disclose only $30.3 billion of retirement liabilities, leaving $55.5 billion undisclosed, down from $66.7 billion in 2011.New Jersey's 'Net Revenue' (total general revenue less total net expenses) was negative in 2012 and has been negative in six of the past eight years (2005, 2008, 2009, 2010, 2011, and 2012). This amount, however, does not include changes in liabilities not fully disclosed such as pensions and retiree health insurance. According to the state's own numbers, New Jersey repeatedly did not satisfy its budgetary duties. Read more on 'Net Revenue'.

[campbell]

whups, I knew I made this thread, but hadn't kept up with it.

via John Bury:
http://www.nj.com/politics/index.ssf...epage-featured

TRENTON — New Jersey on Monday was hit with its 10th credit downgrade under Gov. Chris Christie, reflecting growing government worker pension obligations that are among the highest in the U.S.

Standard and Poor's Ratings Services lowered the state's rating from "A" to "A-". The move comes after the rating agency Standard and Poor's Ratings Services revised its outlook for New Jersey from stable to negative over concerns with the declining pension funding levels and rising retirement liabilities.

"We base the downgrade on our expectation that state budget pressures will intensify in future years," analyst David Hitchcock said in a statement. "Recent events have added incremental out-year budget pressure, in our opinion, to what is already a sizable structural budget imbalance driven primarily by pension underfunding."

Decades of underfunding have weakened the pension system, as have more recent poor investment returns. The fund lost 0.87 percent in the fiscal year that ended in June, based on unaudited figures, and investment returns in the year before were 4.16 percent.

As of July 1, 2015, New Jersey's state and local pension funds have just 37.5 percent of the funding it needs to pay for future benefits. That is based on new reporting standards that require the state to project lower investment returns and had bleak consequences for the state's estimates.

https://burypensions.wordpress.com/2...bout-pensions/

Christie’s Downgrades:
2/9/11 S&P Downgrade: AA- from AA
4/27/11 Moody’s Downgrade: AA3 from AA2
8/18/11 Fitch Downgrade: AA- from AA
4/9/14 S&P Downgrade: A+ from AA-
5/1/14 Fitch Downgrade: A+ from AA-
5/14/14 Moodys Downgrade: A1 from AA3
9/5/14 Fitch Downgrade: A from A+
9/10/14: S&P Downgrade: A+ to A
4/16/15: Moodys Downgrade: A2 from A1
11/14/16: S&P Downgrade: A to A-

[campbell]

or, rather, I think I was shoving the NJ stuff in the big muni thread. NJ definitely deserves its own thread

[campbell]

DOWNGRADE

http://www.reuters.com/article/us-ne...dChannel=11563

New Jersey credit rating cut for 11th time under Christie

New Jersey's credit rating was cut on Monday, affecting $37 billion of debt, the 11th time Wall Street has downgraded the state's bonds since Governor Chris Christie took office in January 2010.

Persistent underfunding of the state's public pension system and weak budgetary position contributed to the rating cut. So did the $1.1 billion of annual revenues the state will lose by 2021 because of sales and estate tax cuts passed last year in conjunction with a gasoline tax hike, Moody's Investors Service said.

Christie, once a Republican presidential candidate, will leave office at the end of the year when his second term expires.

His fiscal 2018 budget proposal last month included a $2.5 billion contribution to the state's retirement system for public employees, a $647 million increase from this year.

Moody's said the bigger contributions under Christie were still not meeting actuarial recommendations and unfunded liabilities were mounting.

"This rating action confirms what the Governor has been saying since 2009," said Willem Rijksen, spokesman for the New Jersey Department of the Treasury, in a statement. "The pension system must be reformed or it will fail and continue to damage the entire state budget."

Christie and the Democrats who control the legislature passed bi-partisan reforms in 2011. Christie has since said more changes are needed to halt ballooning costs, but Democrats soured on Christie's suggestions after he failed to fund the system the way he had agreed to under the prior reforms.

Christie signed a 23 cent gas tax hike in October, the first such increase since 1988, to help raise more money for road, bridge and transit projects. He only agreed after striking a deal with Democrats to trim other taxes.

Moody's cut its rating on the state's general obligation bonds one notch to A3, while its outlook was revised to stable.

Most of the state's debt, however, is appropriation backed, meaning lawmakers must set aside funds for debt service payments every year. Those various bonds were also downgraded one notch to either Baa1 or Baa2, putting them in the lowest investment grade category of triple-B.

https://burypensions.wordpress.com/2...bout-pensions/

New Jersey’s downgrade history under Christie:
2/9/11 S&P Downgrade: AA- from AA
4/27/11 Moody’s Downgrade: AA3 from AA2
8/18/11 Fitch Downgrade: AA- from AA
4/9/14 S&P Downgrade: A+ from AA-
5/1/14 Fitch Downgrade: A+ from AA-
5/14/14 Moody’s Downgrade: A1 from AA3
9/5/14 Fitch Downgrade: A from A+
9/10/14: S&P Downgrade: A from A+
4/16/15: Moody’s Downgrade: A2 from A1
11/14/16: S&P Downgrade: A- from A
3/27/17: Moody’s Downgrade: A3 from A2

[campbell]

https://www.bloomberg.com/news/artic...ies-bond-risks

Rising Seas May Wipe Out These Jersey Towns, but They're Still Rated AAA

Few parts of the U.S. are as exposed to the threats from climate change as Ocean County, New Jersey. It was here in Seaside Heights that Hurricane Sandy flooded an oceanfront amusement park, leaving an inundated roller coaster as an iconic image of rising sea levels. Scientists say more floods and stronger hurricanes are likely as the planet warms.

Yet last summer, when Ocean County wanted to sell $31 million in bonds maturing over 20 years, neither of its two rating companies, Moody’s Investors Service or S&P Global Ratings, asked any questions about the expected effect of climate change on its finances.

....
The same rating companies that were caught flat-footed by the downturn in the mortgage market during the global financial crisis that ended in 2009 may be underestimating the threat of climate change to coastal communities. If repeated storms and floods are likely to send property values -- and tax revenue -- sinking while spending on sea walls, storm drains or flood-resistant buildings goes up, investors say bond buyers should be warned.

"They are supposed to identify risk to investors," said Eric Glass, a fixed-income portfolio manager at Alliance Bernstein, a New York investment management firm that handles $500 billion in assets. "This is a material risk."

Given that climate change is supposed to occur over centuries (as opposed to a couple decades), I think there are bigger threats to NJ finances over the relevant time period.

Are any of these entities issuing 100+-year bonds?

But ignoring the whole climate change issue, there has been a hurricane/flooding risk in NJ for a long time now. I assume bondholders know about that.

[campbell]

SHUTDOWN

http://nymag.com/daily/intelligencer...=sharebutton-t

Christie Shuts Down New Jersey Government, State Beaches and Parks Closed

Embattled New Jersey governor Chris Christie shut down the state’s government early Saturday morning after he and Democratic assembly speaker Vincent Prieto failed to agree on a new budget. As a result, New Jersey’s state-run beaches, parks, and golf courses are closed on this Fourth of July weekend, ticking off confused would-be visitors across the state. Municipal parks are still open and the New Jersey transit system is still running, but non-emergency state offices and agencies have been shuttered and most state employees have been furloughed. Christie has called for a special legislative session on Saturday, but it’s not at all clear the impasse will be solved any time soon.

The disagreement between Christie and New Jersey Democrats mostly hinged on brinksmanship regarding one final issue: Christie’s demand that the state be allowed to use reserve funds of the state’s largest health insurer, Horizon Blue Cross Blue Shield, to pay for opioid-addiction-treatment programs. To get his way, Christie had threatened to use his line-item veto power to cut Democratic spending initiatives from the budget. The Democrat-controlled State Senate compromised with Christie — though, it only gave partial control of the funds he wanted to the state’s next governor — but Assembly Speaker Prieto refused Christie’s demand. And so, with no budget bill signed by Friday’s midnight deadline, the government was forced to shut down for the first time since 2006.
As seen above and at other state parks on Saturday, Christie staffers posted signs announcing the closures and offering “official government advice” directing blame at Prieto for the shutdown (welcome to New Jersey), but as Politico points out, it is more likely that the historically unpopular Christie will face most of state residents’ ire over the shutdown. Regardless, even with a record-low 15 percent approval rating and only six months left in office, Governor Christie still holds most of the power in New Jersey’s top-heavy government, and looking to bolster his already tarnished legacy, he may have no incentive to back down.

http://www.nj.com/politics/index.ssf...art_river_home

N.J. government shutdown 2017: Updates, links on beaches, parks, Christie's budget talks in Trenton

84
Updated on July 2, 2017 at 10:12 AM Posted on July 1, 2017 at 11:28 AM
701
shares
BY MATT ARCO AND CLAUDE BRODESSER-AKNER
NJ Advance Media for NJ.com
Gov. Chris Christie ordered a shutdown of the New Jersey state government early Saturday morning. The 2017 N.J. government shutdown is the first here since 2006 and left residents scrambling as they found state beaches closed, park entrances blocked and confusion at DMV offices.

The budget shutdown does not affect services on NJ Transit, at the NJ Lottery or in New Jersey casinos, but the situation in Trenton has thrown the long holiday weekend into chaos.

Here's a look at the issues, how we got here and what you need to know as you try to navigate what's open and closed during New Jersey's government shutdown:

Why did Chris Christie shut the state government down? Well, that's one of those Jersey things. State law requires a budget to be in place every June 30. If not, the governor shuts down the state. The shutdown includes closures, furloughs and basically putting a lid on everything that is deemed a non-essential service.

What's the latest on New Jersey's state government shutdown? Christie called for a special session of the Legislature for Saturday in Trenton, but Assembly Speaker Vincent Prieto has vowed to block the governor from entering the chambers. Christie didn't wait to engage.
....
Are all New Jersey beaches closed? No, just the ones at the state parks. Unless you know the secret handshake to get into the governor's beach house on Island Beach State Park.


View image on Twitter

http://www.nj.com/politics/index.ssf...own_enter.html

Most state courts down Monday as government shutdown enters day 3

TRENTON -- New Jersey's Supreme, Appellate, Superior and Tax courts will be closed Monday as the state government shutdown enters the workweek and its third full day.

Without a state budget in place by the July 1 deadline, Gov. Chris Christie ordered all nonessential services shuttered, taking out state parks, beaches and Motor Vehicle Commission offices over the weekend.

Now, courthouses across the state will not open as scheduled Monday morning -- save for "emergent court matters" or other functions deemed essential by Chief Justice Stuart Rabner.

Emergent matters, according to the shutdown order, include:

First appearances
Applications for special medical guardianship
Reviews of delinquent child support incarcerations
Juvenile detention hearings
Civil commitment hearings
Residential foreclosure stays of eviction
Stays of sheriff's sales
Landlord/tenant stays of eviction
Division of Child Protection and Permanency removal applications
ISP and JISP probation supervision
Electronic monitoring
Emergency applications to the Appellate Division and the state Supreme Court
The clock will essentially stop for filing an appeal or other matters that the court sets deadlines. Each day that the courts are closed will be treated like a legal holiday, Rabner said.

Jurors needn't report for jury duty during the closure -- court officials recommend checking the jury message system after 5 p.m. each day.

Child support and traffic tickets can be paid online.

http://nypost.com/2017/07/01/new-jer...isties-family/

Christie’s family gets beach all to themselves after NJ shutdown

One family gained from New Jersey’s government shutdown on Saturday — Gov. Chris Christie’s wife, their kids and their friends had one of the East Coast’s most beautiful beaches all to themselves.

The Garden State’s first family was set for an exclusive holiday at the official gubernatorial shore home at Island Beach State Park in Berkeley as police turned away everyone else.

Sound unfair? Deal with it, Christie told reporters.

“The governor has a residence at Island Beach,” he said. “Others don’t. That’s the way it goes. Run for governor and you can have the residence.”

Sounds like he wants to see if his approval rating drops to 0%. You can do it, Christie!

[campbell]

https://www.ai-cio.com/news/governor...ampaignId=1312

Gov. Christie Signs New Jersey’s Fiscal Year 2018 Budget

New Jersey Gov. Chris Christie had a busy Fourth of July as he signed the state’s Fiscal Year 2018 state budget, which includes the largest pension payment in state history at $2.5 billion.

The budget brings Christie’s total contributions to the state’s defined benefits funds to $8.8 billion, – more than two and a half times the combined total contributions of every New Jersey state governor since 1995. but It’s the first year that the payments will be made quarterly, a move intended to allow the fund to grow more quickly toward solvency, according to a press release.

It’s also the first year that lottery revenues will also fund the state’s pension system, a policy Christie originally proposed during his February state budget address.

Senate Bill 3312 will implement the Lottery Enterprise Contribution, generating $37 billion in pension funds over 30 years. This will provide an immediate $13.5 billion reduction in New Jersey’s long-term retiree obligations.

According to press release, the law will “immediately elevate the system’s Funded Ratio from 45 percent to 59 percent, while reducing the General Fund obligation to the system.” The release also expects the law will allow the retirement system’s funding ratio to become 90% funded by fiscal year 2047, as well as lowering the state’s budget costs.

“My Fiscal Year 2018 budget completes eight straight years of instilling fiscal sanity in Trenton, accomplished by making the difficult choices too many of my predecessors were afraid to do in the face of strong political pressures,” Christie said in the release. “New Jersey is unquestionably better than we found it eight years ago.”

[MountainHawk]

According to press release, the law will “immediately elevate the system’s Funded Ratio from 45 percent to 59 percent, while reducing the General Fund obligation to the system.” The release also expects the law will allow the retirement system’s funding ratio to become 90% funded by fiscal year 2047, as well as lowering the state’s budget costs.

Problems solved. Lock the thread.

[campbell]

https://www.wsj.com/articles/does-ne...cut-1507931442

Does New Jersey’s Next Governor Want to Live in Connecticut?
The Garden State should learn from Hartford’s bad example: You can’t tax your way to prosperity.

Spoiler:

No matter what this year’s gubernatorial candidates may say, painless solutions to New Jersey’s fiscal challenges don’t exist. The state’s budget may be balanced on a “cash” basis, but a massive structural deficit lurks beneath. New Jersey’s property taxes, already the highest in the nation, are being driven up further by the state’s pension burden and escalating health-care costs for government workers.

Some politicians seem to think New Jersey can tax its way to budgetary stability. At a debate this week in Newark, the Democratic gubernatorial nominee, Phil Murphy, pledged to spend more on education and to “fully fund our pension obligations.” But he refused to say whether he would extend a soon-to-expire 2% cap on raises for firefighters and police, even though it is credited with keeping property taxes in check. Polls show Mr. Murphy is leading his Republican opponent, Lt. Gov. Kim Guadagno, by double digits. But just taxing more would risk making New Jersey’s fiscal woes even worse.

A useful comparison is Connecticut, which has tried to tax its way out of a similar set of problems. The two states have much in common: a relatively low poverty rate, high levels of personal income, a dependence on New York City, and unsustainable pension costs. The Pew Charitable Trusts ranks New Jersey and Connecticut as having among the worst-funded pensions in the nation.

The difference is that while New Jersey has held the line on taxes lately, Connecticut has enacted three substantial tax increases since 2009. They haven’t solved the state’s problems. Deficits have continued to recur, and Connecticut lawmakers are arguing even now about how to close a $3.5 billion gap for the next two fiscal years.

But the tax increases do appear to have dampened Connecticut’s economy. Only this past June did the state finally regain the private-sector jobs it lost during the Great Recession, more than three years after the nation as a whole did, and over a year after New Jersey. Still, big business is fleeing Connecticut: General Electric and Aetna are moving their corporate headquarters elsewhere. The latter was an especially hard blow, given that Aetna was founded in Hartford more than 150 years ago and helped turn the city into an insurance hub. “The state’s persistent financial woes and refusal to recalibrate to 21st-century realities have been pushing out people and businesses for years,” the Hartford Courant lamented.

Although Connecticut has gotten more responsible in recent years about making its pension payments, officials have had to resort to questionable fiscal maneuvers. Early this year, Connecticut restructured the long-term payment schedule for its State Employees Retirement System in a way that added at least $14 billion in costs after 2032. As for the other major pension system, which covers teachers, Gov. Dannel Malloy has proposed shifting onto cities and towns hundreds of millions in annual costs that today are borne by the state.

Connecticut has found that taxing wealthy residents has limits. Although the top income-tax rate has risen from 5% to 6.99% since 2009, the state has also found it necessary to tap the middle class. Lawmakers raised income taxes on filers making as little as $50,000. Property taxes are already the second highest in the nation, but they’ll go even higher if Mr. Malloy’s plan to shift teacher pension costs goes through.

New Jersey is grasping at the same straws. During the current fiscal year, the state’s pension contribution is $2.5 billion, only about half the amount actuarially recommended. The so-called millionaire’s tax, a proposal Gov. Chris Christie has vetoed several times since taking office in 2010, will no doubt make a comeback if Mr. Murphy is elected. Yet it would bring in only an estimated $600 million a year. Other ideas for filling the gap, such as taxing marijuana, still fall far short of what New Jersey needs.

Of course, more revenue is not New Jersey’s only option. In 2015, the New Jersey Pension and Health Benefit Study Commission proposed bringing health benefits for active and retired public workers into line with private-sector norms. Active workers would shoulder higher out-of-pocket expenses, though their premiums would go down. Retirees would be given reimbursement accounts to purchase insurance on private exchanges. This plan would save billions a year, which the commission suggested be dedicated to funding a reformed pension system.


Connecticut’s experience shows the folly of taxing the middle class to support platinum benefits for the public workforce while shifting the burden of legacy pensions onto future taxpayers. The result has been a slower economy and no serious drive to address the underlying problem, namely the constantly escalating cost of government. If New Jerseyites think things can’t get much worse, they ought to look a little to the northeast.

Ms. Egea is the president of the Garden State Initiative. Mr. Eide is a senior fellow at the Manhattan Institute and author of “Connecticut’s Fiscal Crisis Is a Cautionary Tale for New Jersey,” forthcoming from the Garden State Initiative.