KBRA Upgrades State of New Jersey General Obligation Bonds to AA- and Appropriation Bonds to A+; Assigns A+ Rating to New Jersey Transportation Trust Fund Authority Transportation Program Bonds, 2026 Series AA and 2026 Series BB
2 Sep 2026 | New York
KBRA upgrades the State of New Jersey's General Obligation Bonds to AA-, from A+. KBRA additionally upgrades the following State of New Jersey annual appropriation bonds to A+, from A: New Jersey Transportation Trust Fund Authority Transportation Program Bonds; New Jersey Transportation Trust Fund Authority Transportation Program Notes (Fixed Rate); New Jersey Economic Development Authority Lease Revenue Bonds; and, New Jersey Educational Facilities Authority Revenue Bonds, Higher Education Capital Improvement Fund Issues.
The rating upgrade for the State’s General Obligation Bonds recognizes its increasingly well-established track record of full actuarial pension funding, substantial progress in reducing long-term liabilities, and adherence to improved budget management. The upgrade of the State's aforementioned annual appropriation bonds reflects assessment of such bonds one level below the State's general obligation rating reflecting the risk of non-appropriation.
Finally, KBRA assigns a long-term rating of A+ to the New Jersey Transportation Trust Fund Authority Transportation Program Bonds, 2026 Series AA and Transportation Program Bonds, 2026 Series BB.
The rating Outlook for for each rated obligation is Stable.
Key Credit Considerations
The rating actions reflect the following key credit considerations:
Credit Positives
- State economic base is large and diverse. Per capita personal income is the eighth highest in the nation.
- The Governor has broad executive powers under the New Jersey Constitution to adjust the budget and reduce spending to maintain budget balance.
Credit Challenges
- Unfunded pension and OPEB liabilities are very high relative to personal income and gross state product.
- While the State has drawn down the extraordinary reserves accumulated during the pandemic only gradually, a full transition from these non-recurring funds may be challenging.
Rating Sensitivities
For Upgrade
- Track record of consistently balanced operations that does not rely upon non-recurring revenues, provides full actuarially determined pension contributions, and supports maintenance of substantial operating reserves.
- Economic growth patterns that meet or exceed regional and national trends.
For Downgrade
- A resumption of the pattern of underfunding full actuarial pension contributions.
- A significant diminution of reserves to a level no longer commensurate with the rating level.
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