The state is planning to borrow up to $4.29 billion in debt through public markets on Nov. 18, but a recent downgrade to the state’s credit rating may make borrowing costs associated with the bond sale more expensive.
S&P Global Ratings, one of three major Wall Street credit rating agencies, on Friday lowered its rating on New Jersey general obligation bonds from A- to BBB+, citing “significant structural deficits” in the state budget.
Gov. Phil Murphy has certified state revenue projections are now $398 million above the amount certified in the FY 2021 budget that took effect on Oct. 1. This means that the most the state can borrow next week under the COVID-19 Emergency Bond Act is $4.288 billion, down from the original $4.687 billion in the governor’s September revenue certification.
In response to lawsuits challenging the constitutionality of the emergency bond act, which was signed into law without voter approval, the State Supreme Court ruled the bond sale could go forward, but the amount of borrowing cannot exceed the fiscal need caused by the pandemic.
Under the court ruling, the governor or state treasurer is required to publicly certify the projected revenue and consequent shortfall as a result of the COVID-19 pandemic before each tranche of emergency general obligation borrowing occurs. The governor certified revenues on Nov. 6.
The Department of Treasury issued a statement saying its plan is to issue up to $4.29 billion in debt on Nov. 18 through the public markets, subject to market conditions at the time.
NJBIA had previously urged the state to sell at least some of these bonds through the Federal Reserve’s Municipal Liquidity Facility to hold down borrowing costs.