New Jersey has secured another significant affirmation of its improved financial health, as the Kroll Bond Rating Agency (KBRA) announced a key upgrade to the state’s fiscal outlook. On Monday, KBRA revised the outlook on New Jersey’s General Obligation Bonds and related State Appropriation Bonds to Positive, moving up from its previous “Stable” designation. The action signals that a full credit rating upgrade may be warranted in the near term, continuing a remarkable multi-year reversal of the state’s long-standing fiscal challenges.
KBRA’s decision to move the outlook reflects specific, sustained actions taken by the state government, primarily focused on tackling its massive unfunded public pension liability and establishing a durable budget surplus. The agency affirmed the state’s long-term General Obligation bond rating at A+.
The drivers of the positive outlook
In its release detailing the action, KBRA analysts pointed directly to the state’s success in managing long-term debt and reserves.
“The Outlook revision to Positive reflects the State’s progress in reducing long-term pension liabilities and its continued adherence to conservative budgeting practices that have supported the orderly use of reserves accumulated during the COVID-19 pandemic,” KBRA stated.
KBRA also recognized the successful effort to rebuild the state’s reserves. By committing to conservative budgeting, the administration has maintained a significant budget surplus, which serves as a crucial buffer against unexpected economic downturns or revenue losses. This financial flexibility is precisely what rating agencies seek when evaluating a government’s creditworthiness.
Governor Murphy hails “vote of confidence”
Gov. Phil Murphy celebrated the KBRA outlook upgrade as the latest evidence that the state’s fiscal strategy is succeeding.
“This announcement by KBRA is another indicator that we are setting New Jersey up for long-term financial success,” Murphy said. “This vote of confidence, in addition to the nine credit rating upgrades we have received in just over three years, signals that our efforts to build a strong, reliable surplus and fulfill our pension obligations are paying off.”
The positive outlook from KBRA is the latest in a flurry of positive rating actions from major agencies. This year alone, both Moody’s Investors Service and S&P Global Ratings have upgraded New Jersey’s General Obligation bonds, citing similar themes of reduced debt reliance, robust surplus levels, and the commitment to pension funding.
The latest actions mark a dramatic turnaround from the state’s previous fiscal trajectory, demonstrating a structural improvement in the state’s financial management that is now being independently verified by Wall Street. Since the beginning of 2022, the state has now accumulated nine total rating upgrades or positive outlook revisions across the major rating firms.
Implications for taxpayers and infrastructure
The impact of credit ratings is very real for New Jersey taxpayers.
A positive credit outlook and improved rating profile typically translate directly into lower borrowing costs for the state. When New Jersey issues bonds to fund massive, long-term investments—such as school construction, road and bridge repairs, or major transit projects—a better credit rating means investors charge less interest. Over the decades-long lifespan of these bonds, these reduced borrowing costs can save taxpayers hundreds of millions of dollars, freeing up critical funds for other state priorities or tax relief measures.
In this round of rating actions, KBRA specifically affirmed a long-term rating of A for several key state authorities, underscoring the improved stability in their ability to finance critical infrastructure:
- New Jersey Transportation Trust Fund Authority (NJTTFA): Affirmed at A for Transportation Program Bonds and Transportation Program Notes (Fixed Rate). KBRA also assigned a new long-term rating of A to the NJTTFA Transportation Program Bonds, 2025 Series AA.
- New Jersey Economic Development Authority (NJEDA): Affirmed at A for Lease Revenue Bonds.
- New Jersey Education Facilities Authority (NJEFA): Affirmed at A for Revenue Bonds, Higher Education Capital Improvement Fund Issues.
These affirmations highlight that the state’s fiscal discipline extends to its major investment arms, which are responsible for maintaining and building the infrastructure that supports New Jersey’s large and diverse economic base.
Looking ahead
The KBRA Positive Outlook is not yet a full rating upgrade, but it signals that the next step may be imminent. According to KBRA’s own sensitivity analysis, a future upgrade would likely be triggered if the state maintains its “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.”
In essence, New Jersey’s financial management has moved from a place of chronic concern to one of active structural reform, a change that provides greater stability and flexibility to address both legacy liabilities and future economic challenges. The consensus from the major rating agencies confirms that, fiscally, the Garden State is moving in the right direction.
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