But New Jersey remained the U.S. state with the worst credit rating outside of Illinois.

“I know enough having worked at Goldman Sachs for 20-odd years, that with ratings agencies, it’s a journey,” Murphy said in an October interview with Bloomberg News. “They take you down fast, maybe even based on a moment in time or a data point, but they take you up only because you rebuild trust with them over time.” 

To that end, Murphy said he was intent on making pension payments, spending the state’s surplus responsibly and making “reasonable” revenue projections. “My guess is a couple more bats, and we’re consistent in keeping things going in the right direction, it could mean a year or two, which for New Jersey, would be big,” Murphy said in October.

A month later, Murphy became the first New Jersey Democratic governor to win re-election since 1977, by a closer-than-predicted 3 percentage points. In an annual policy speech in January, the governor pledged not to raise taxes and called New Jersey “a beacon of what’s possible,” with high Covid-19 vaccination rates, a growing economy and strides on civil rights, gun violence and reproductive rights.

On March 8, he will present his spending plan for the fiscal year that starts in July.

More than midway through fiscal 2022, total revenue is up $4 billion, or 22% more than than the prior comparable period, with big gains in sales and corporate business tax collections, state treasury reports show. The state also has $3.3 billion in unallocated federal Covid-19 recovery funds, according to Murphy’s office. 

Those funds are “giving New Jersey a chance to make some progress on what has been some real credit concerns,” Doug Offerman, Fitch’s lead analyst for New Jersey, said in an interview.

Challenges Ahead
Challenges remain. Unemployment, at 6.3%, is third-highest among states, behind California and Nevada, and more than 2 percentage points above the U.S. rate. The unfunded public pension liability in 2020 grew 18%, to $133 billion, according to Moody’s. 

Murphy signed a record $46.4 billion budget with a record pension payment of $6.9 billion, marking the first time in 25 years that the state made a full contribution. He faces pressure to maintain those full payments.

“We are looking to see if the governor is staying the course on sort of staying in repair mode for the state’s finances,” Offerman said. “Lots of progress has been made, but there is a long way to go.”