TRENTON, N.J. — New Jersey received a significant credit upgrade after Kroll Bond Rating Agency raised the state’s general obligation bond rating to AA- from A+, citing stronger pension funding, reduced long-term liabilities and improved budget management.
The upgrade is the highest rating KBRA has given New Jersey since it began rating the state in 2015 and marks the first credit-rating increase during Gov. Mikie Sherrill’s administration.
KBRA said New Jersey has built an increasingly established record of making its full actuarially required pension payments while preserving substantial financial flexibility.
The fiscal 2027 budget provides for a full pension contribution for the sixth consecutive year and projects an undesignated year-end fund balance equal to about 10% of appropriations.
The rating agency also pointed to progress in reducing long-term liabilities and better management of reserves accumulated in the years following the pandemic.
For taxpayers, the upgrade has a direct financial significance.
Higher credit ratings generally allow governments to borrow at lower interest rates because bond investors view the debt as carrying less risk. For a state that finances major transportation, infrastructure and capital projects, even modest reductions in borrowing costs can translate into substantial long-term savings.
KBRA also upgraded several state-backed annual appropriation bonds to A+ from A, including debt connected to the New Jersey Transportation Trust Fund Authority, New Jersey Economic Development Authority and New Jersey Educational Facilities Authority.
The outlook on the rated obligations is stable.
The upgrade now puts KBRA’s rating for New Jersey one notch above the state’s current A+ ratings from S&P and Fitch and broadly in line with Moody’s Aa3 rating.
New Jersey’s fiscal position has improved considerably from the period when pension underfunding, large liabilities and repeated credit downgrades weighed heavily on the state.
The Sept. 2 KBRA action represents the state’s 10th consecutive credit-rating upgrade across the four major rating agencies since New Jersey was downgraded during the COVID-19 pandemic, according to the state Treasury Department.
Gov. Sherrill said the upgrade reflects steps taken in the fiscal 2027 budget, including reducing the state’s structural deficit by more than half, maintaining roughly a $6 billion surplus and making the full pension payment.
The stronger rating also carries a broader business message.
Credit ratings are closely watched by investors because they provide an independent assessment of a government’s financial strength and its ability to meet long-term obligations. A stronger state balance sheet can help support infrastructure investment while improving New Jersey’s overall financial credibility with businesses and capital markets.
KBRA nevertheless said challenges remain, including New Jersey’s still-high unfunded pension and other post-employment benefit liabilities and the need to transition carefully away from extraordinary reserves accumulated following the pandemic.
The upgrade therefore represents substantial progress rather than the end of New Jersey’s fiscal challenges.
For taxpayers and businesses, however, the direction is favorable: New Jersey is borrowing from a stronger financial position, carrying a better credit rating and potentially paying less to finance the investments needed to support future economic growth.
JBizNews Desk | Trenton, New Jersey
© JBizNews.com. All Rights Reserved. Reproduction, redistribution, republication or use of this content, in whole or in part, without the express written permission of JBizNews is prohibited.
