Salvador Rizzo of the Star-Ledger writes Christie's pension plan could trigger another downgrade, S&P warns. Standard & Poor's placed New Jersey on "Credit Watch with negative implications," on June 2, warning that Governor Christie's plan to "cut funding public-worker pensions" could lead to another debt downgrade withing the next three months.
Standard & Poor's cut New Jersey's credit rating by one notch in April, to A+, one of the lowest ratings in the country. That was before Christie's administration announced a big miss in its revenue forecast for the current and incoming fiscal years. The two-year budget gap is now estimated at $2.7 billion.
Governor Christie announced that rather than raise taxes on the wealthy as Democrats have proposed he plans to cut two payments he promised to make to the state pension fund, which would bring the combined payments down from $3.8 billion to $1.38 billion. Standard and Poor's noted that this is not a solution to the long-term revenue shortfall but just a one-off patch.
"We believe the state's decision to reverse course on its pension reform is the result of a revenue forecast that is not aligned with current economic conditions in the state, rapidly growing fixed costs, and limited flexibility with which to address any significant deviations from the forecast," S&P analysts wrote today, placing New Jersey on "CreditWatch with negative implications."
"In our view, the governor's decision to delay pension funding, while providing the necessary tools for cash management and budget control, has significant negative implications for the state's liability profile."
Standard & Poor'a reports the state's pension liability is $47 billion and that New Jersery is "neglecting to address long-term, "structural" issues with its budget aside from the pension problem."
"By using bullish assumptions about revenue growth and one-time measures to close budget gaps, the state defers making long-term structural changes to better align revenues and expenditures, pushing budgetary pressures to future years' budgets and increasing its exposure to an eventual economic downturn," the analysts wrote.
Democratic leaders are balking at approving Christie's proposal and Senate President Stephen Sweeney has threatened to shut down the state government.
Rizzo tells us that Christie has already vetoed Democratic proposals for a millionaire's tax three times.
Salvador Rizzo also reports Christie's pension cut heads to court for a last-minute showdown. Superior Court Judge Mary Jacobson will hear arguments on June 25, five days before the budget deadline of June 30.
TRENTON — A state judge announced today that she will hear a major challenge to Gov. Chris Christie's plan to take funds meant for public-workers' pensions to solve a budget crisis, a development that adds even more pressure on lawmakers and the governor as they scramble to finish a new budget by June 30. [...]
Through their unions, the troopers are challenging an executive order signed by Christie last month that takes $900 million designated for the pension system this fiscal year and uses it to plug an unexpected shortfall in the state budget that came to light in April.
The move is illegal under a pension overhaul Christie himself signed into law in his first term, the troopers argue, and it violates a section of the state constitution that says "the Legislature shall not pass any bill ... impairing the obligation of contracts."
Governor Christie is having another bad day.
We will have to wait to learn if any of the five investigations against Christie will result in indictments or findings of criminal wrong doing, however, we may not have to wait much longer for citizens of New Jersey to draw adverse judgement on his leadership ability.
3:18 PM PT: Correction: S&P issued its Credit Watch bulletin on June 2.
3:31 PM PT: Bob and Barbara Dreyfuss write an excellent and detailed article reviewing the the case the SEC is investigating as possible fraud, explaining how Governor Christie managed to divert $1 billion from Port Authority funds, in $1 Billion Port Authority Heist Could Be the Final Nail in Christie's Political Coffin, which a2nite brought to my attention.
Authorities are looking into the Port Authority's funding for renovations to the Pulaski Skyway, which connects New York to Newark, NJ. (AP Photo/Julio Cortez)
Two former close aides to New Jersey Governor Chris Christie, Jeffrey Chiesa and Deborah Gramiccioni, both of whom worked with Christie when he was the US Attorney in New Jersey before becoming governor, have been subpoenaed in an investigation into what looks to have been an illegal maneuver to secure a cool $1 billion in Port Authority funds to rebuild a roadway in New Jersey. And it's this, if it has legs, and not the lane-closing scandal, that could end up doing the real damage to Christie's political future. ...
According to Main Justice:
If investigators find the state road repairs were mischaracterized in bond offering documents as "Lincoln Tunnel Access Improvements" to make the projects appear as though they're legally permitted, it would constitute a knowing, intentional material misstatement in violation of federal, state and securities laws and constitute fraud. Such fraud would also mean that the bonds issued and outstanding for fixing state roads would no longer be tax exempt opening another whole can of illegal worms according to a source familiar with such investigations.
Pressing the investigation, Vance has now subpoenaed the two top officials inside Christie's administration who were most involved with the handling of the Pulaski Skyway characterization, Jeffrey Chiesa and Deborah Gramiccioni.