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Another ratings agency drops New Jersey’s credit outlook to ‘negative’

Another ratings agency drops New Jersey’s credit outlook to ‘negative’

MARCH 21, 2014, 3:32 PM    LAST UPDATED: FRIDAY, MARCH 21, 2014, 4:40 PM

Another Wall Street ratings agency is warning investors about the credit outlook for New Jersey, citing the state’s slow recovery from recession and a state budget that remains structurally imbalanced.

Fitch Ratings on Friday maintained New Jersey’s “AA-” credit rating, but lowered the state’s credit outlook from “stable” to “negative.” The action follows a similar warning issued in December by Moody’s Investors Service, which also affirmed the state’s credit rating but changed the outlook from “stable” to “negative.”

Standard & Poor’s, another Wall Street rating agency, has held a negative outlook for New Jersey since September 2012

Fitch attributed its change in New Jersey’s credit outlook to both state economic conditions and issues with the state budget.

“The state’s economic performance has lagged the nation in recovery from the recent recession, with improvement in 2013 trailing off at the close of the year,” Fitch said Friday.

“Minimal cash balances have been maintained in recent years, providing limited flexibility to absorb unforeseen needs or revenue under-performance from overly optimistic forecasting,” Fitch said.

But the ratings agency cited as positives New Jersey’s wealthy population and Governor Christie’s strong executive powers, as well as the state’s “consistent history” of making spending reductions when necessary. Recent improvement in New Jersey’s unemployment rate was also noted.

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