KBRA Revises Outlook to Positive for New Jersey GO and Related State Appropriation Credits; Affirms Outstanding Ratings; Assigns A Rating to NJTTFA Transportation Program Bonds, 2025 Series AA

KBRA affirms the long-term rating of A+ for the State of New Jersey's General Obligation Bonds and revises the rating outlook to Positive, from Stable, for the State's General Obligation Bonds and related State Appropriation bonds.

The Positive Outlook 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. A rating upgrade may be warranted in the near term if the State maintains full actuarial pension contributions on an ongoing basis while preserving financial flexibility, notably strong operating reserves.

KBRA additionally assigns a long-term rating of A to the New Jersey Transportation Trust Fund Authority (NJTTFA) Transportation Program Bonds, 2025 Series AA.

Lastly, KBRA affirms the long-term rating of A for the following bonds:

New Jersey Transportation Trust Fund Authority

• Transportation Program Bonds
• Transportation Program Notes (Fixed Rate)

New Jersey Economic Development Authority (NJEDA)

• Lease Revenue Bonds

New Jersey Education Facilities Authority (NJEFA)

• Revenue Bonds, Higher Education Capital Improvement Fund Issues

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.
• 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, the transition away from reliance on 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 balance financial operations to a level no longer consistent 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
• ESG Global 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: 1011648

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