New Jersey Wins Positive Outlook by Moody’s on Economic Strength

(Bloomberg) -- New Jersey had its outlook raised to positive from stable by Moody’s Ratings on Wednesday, on its strong economic performance compared to nearby states.

The ratings firm also affirmed the Garden State’s issuer and general obligation bond ratings at A1, the fifth-highest level of investment grade. New Jersey has an economy that’s “outpacing mid-Atlantic peers and repeated appropriations of full actuarial state pension contributions that signal strong practices,” Moody’s lead analyst Edward Hampton said in a note.

The outlook revision incorporates “prospects for strong economic and revenue performance that will allow the state to narrow its structural gap and retain substantial budgetary reserves while maintaining full actuarial pension contributions in fiscal 2026,” Hampton said.

The positive outlook comes more than a year after New Jersey scored a one-notch ratings boost from Moody’s after state officials made full pension contribution payments for the first time in decades. That move to A1 from A2 was followed by upgrades from both Fitch Ratings and S&P Global Ratings that same week.

New Jersey could see another ratings hike from Moody’s if it maintains its progress in reducing its long-term liability and fixed cost ratios, as well as any action that encourages the state to continue making full actuarial pension contributions, according to the note.

The state’s issuer rating is underscored by federal funding commitments for its Gateway plan, the long-delayed $16 billion rail tunnel project connecting New York and New Jersey, limiting its borrowing needs in the coming years.

The Garden State’s gambling mecca, Atlantic City, was upgraded to the cusp of an investment-grade rating earlier this year amid signs of its strengthening fiscal position with higher fund balances and a decline in debt.

New Jersey’s overall grade still remains below almost all other states in the country, with only Illinois being rated lower.