As reported by app.com, New Jersey’s credit rating was downgraded by a major Wall Street rating agency, whose concerns over state debt and obligations for public retirees’ benefits now mean higher costs for the state to borrow money. Standard & Poor’s moved New Jersey’s bond rating down a notch to its fourth highest level. The move ignited an immediate partisan skirmish over which party is to blame and upped the pressure for pension and health benefit changes.

“The clock is ticking away on a pension and benefit bomb that can damage the health of the finances of our state,” Governor Chris Christie said at a town-hall meeting in Union City. Democrats said Christie aggravated the situation by not putting any money into the pension fund in the current budget year, when $3 billion was due. This coming year $3.5 billion is due, though a state law says that roughly $500 million will be required.

“Gov. Christie inflicted severe damage last year when he skipped the state’s pension payment,” said Assemblyman Louis Greenwald. “It was reckless and made the problem much worse. It was so short-sighted, in fact, that it wiped out all the benefits from the bipartisan pension reforms ushered into law early last year.” 

Standard & Poor’s said in its report that pension funding “remains the most significant risk to the state’s long-term credit quality.” Christie and fellow Republicans want to increase the retirement age, reduce benefits and boost employees’ contribution to the pension fund. Democratic leaders have a counterproposal that would reduce benefits and give unions input over managing pension investments.

The change is expected to have little immediate impact on state costs, as the state’s financial difficulties have been well documented and taken into account in recent borrowings. One recent bond sale was reduced in size because the rates were not meeting expectations.

Credit ratings for various state agencies dependent on appropriations from the state budget were also lowered by Standard & Poor’s. “We understand that Gov. Chris Christie has recently announced various reform initiatives that, if approved, could help begin to manage the state’s pension liability,” said the report. “We will continue to monitor this, but in our view progress on this front is likely to be gradual and we expect the state’s debt and liability profile to remain weak and continue to be a source of budget pressure.”

Standard & Poor’s said New Jersey’s pension system was 56 percent funded as of last June and that it expects the “pension funding ratio will weaken further as a result of the failure to fund” the required payment this budget year, though solid growth in investment income could offset that. The State’s long-term obligation for health benefits for retirees, which it finances on a year-by-year basis, is estimated at close to $57 billion.