Moody’s Investor Services announced Wednesday that it is upgrading New Jersey’s general obligation bonds to an A2 credit rating from A3, with a “stable” outlook.
The upgrade is the state’s first since 2005 and an indication that the steps Gov. Phil Murphy has been taking against the state’s debt are viewed positively.
The ratings agency, citing the steps the state has taken to “aggressively” address liability burdens, also upgraded the state’s related subject-to-appropriation bond ratings by one notch (to A3 from Baa1) for bonds financing essential-purpose projects, and by one notch (to Baa1 from Baa2) for bonds financing less-essential projects.
Bond ratings are significant, as the grade is an indicator of credit quality — or the creditworthiness of corporate or government bonds.
Moody’s, one of the three big ratings agencies, has at least 18 levels of bonds. An A2 grade is sixth-best. Here’s a look at the 10 top ratings:
- AAA: Prime
- Aa1: High grade
- Aa2: High grade
- Aa3: High grade
- A1: Upper medium
- A2: Upper medium
- A3: Upper medium
- Baa1: Lower medium
- Baa2: Lower medium
- Baa3: Lower medium
Murphy was thrilled about the announcement.
“Our efforts to build New Jersey’s credit rating back up from decades of downgrades have yielded another positive result,” he said. “This proves that facing our challenges head on — rather than delaying and deferring — is the best way to get our house in order.
“I’m proud to say that making the full pension payment, retiring more than $3 billion in bonded debt and reducing our reliance on borrowing has improved the state’s fiscal footing without slashing the vital programs benefiting New Jersey families.”
State Treasurer Elizabeth Maher Muoio was excited, too.
“This is great news for the state and, more importantly, our taxpayers,” she said. “Our improved credit rating will not only decrease the cost of annual borrowing for the state, saving taxpayers money now and in the future.
“But it also provides further evidence that we are taking the right steps on our continuing path toward fiscal security.”
Last summer, Moody’s upgraded the outlook for New Jersey’s general obligation bonds from “stable” to “positive.”