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

NEW YORK--(BUSINESS WIRE)--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 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.

To access ratings and relevant documents, click here.

Methodologies

• Public Finance: U.S. State General Obligation Rating Methodology
• Public Finance: U.S. State Annual Appropriation Obligation Rating Methodology

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA), one of the major credit rating agencies (CRA), is a full-service CRA registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority. In addition, KBRA is designated as a Designated Rating Organization (DRO) by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized as a Qualified Rating Agency by Taiwan’s Financial Supervisory Commission and is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider (CRP) in the U.S.

Doc ID: 1016777