Chris Christie is at risk of matching the record of six New Jersey bond downgrades under former Democratic Governor James McGreevey as ratings companies pan the second-term Republican’s revenue forecasts.
Fitch Ratings and Moody’s Investors Service give New Jersey negative outlooks, meaning more cuts are possible as the state’s economic rebound trails the nation’s. Fitch’s cut this month brought the tally of downgrades under Christie to five. Only California and Illinois have lower grades among U.S. states.
Christie, 51, took office in 2010 pledging to end years of Democratic bungling of state finances and fix a pension system heading toward insolvency. His administration has overestimated revenue projections for three straight years, necessitating one- time measures to close mid-year gaps. With less than two months left in the fiscal year, he faces an $807 million hole.
“Not every state got it so wrong on revenues,” said Lucy Dadayan, a senior policy analyst at the Nelson A. Rockefeller Institute of Government in Albany, New York.
Christie isn’t alone in seeing revenue growth falter. States’ personal income-tax collections last quarter rose by an “insignificant” 0.7 percent from a year earlier, according to the institute. It was the skimpiest increase since the same period in 2010, the group said, citing preliminary data from 46 states.
The governor’s disclosure on April 28 of the latest revenue shortage brought the full-year gap to $1.06 billion, or 3.2 percent, below the original $33 billion budget, according to an April 30 report by Baye Larsen, a Moody’s analyst.
While Moody’s stopped short of a downgrade, Larsen called the shortfall “credit negative” because Christie would probably use one-time measures to close it. He’s already gone that route this year, through steps such as shrinking New Jersey’s pension payment by reducing the actuarial assumption.
“The rating agencies almost uniformly agree with what the governor has been saying,” Kevin Roberts, a Christie spokesman, said in a May 6 e-mail. “The costs of pension, health benefits and debt service challenge our long-term fiscal health, and require further reforms.”
Chief executives of other states have also received multiple downgrades during their terms. In Illinois, which has the worst-funded U.S. state pension system, Democratic Governor Pat Quinn has seen 13 cuts since taking office in 2009.
McGreevey, governor from January 2002 through November 2004, relied on borrowing to balance the budget. In his final year in office, the state Supreme Court banned bond sales to fund operating expenses.
In 2004, he signed a bill raising taxes on those earning more than $500,000 a year. The measure, designed to support property-tax relief, was dubbed “the millionaire’s tax.”
“We did the millionaire’s tax, and that mitigated it,” McGreevey said by telephone. The 56-year-old, who counsels prisoners on workforce re-entry and leads a jobs program for Jersey City, declined to comment further on downgrades during his administration. He said he was “no longer in the politics business.”
The first Republican elected New Jersey governor since 1997, Christie staked a potential 2016 presidential run on a reputation for checking spending. He has said his job was to be “the adult in the room” in a state where Democrats borrowed or raised taxes to solve budget deficits.