Improved Credit Standing for New Jersey: Moody's boosts rating, sets outlook at stable
New Jersey Secures Moody's Upgrade Amid Robust Budgetary Surplus
In a significant development, Moody's Ratings has upgraded the state of New Jersey's issuer rating to Aa3, the fourth-highest investment-grade rating, from A1. This upgrade comes as a result of the state's ability to maintain a comparatively robust budgetary surplus.
The state's undesignated fund balance, which represents almost 12% of appropriations for the fiscal year ending June 30, 2026, is projected to be $6.75B. This substantial fund balance is a testament to the state's prudent financial management.
Moody's expects the state to continue its sound pension contribution practices, having already been providing full actuarial pension contributions and meeting spending commitments. The estimated reversal of the New Jersey state budget for the same fiscal year is scheduled to occur during that period.
However, it's important to note that retirement benefit underfunding will remain a bigger challenge for New Jersey than for the vast majority of states.
Investors interested in New Jersey's municipal bond market may find opportunities in funds such as the BlackRock MuniHoldings New Jersey Quality Fund (MUJ) and the Nuveen New Jersey Quality Municipal Income Fund (NXJ).
While the upgraded rating is a positive sign for New Jersey's financial health, the state still faces challenges, particularly in managing its expenses, especially with regards to health care. Federal policy changes are expected to accelerate already rapid expense growth in health care for New Jersey, as in many other states.
Despite these challenges, the upgrade by Moody's is a clear indication of the state's financial resilience and its commitment to sound fiscal practices.
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