Christie Steering the Titanic Right Into an Iceberg
If you are a State Trooper in New Jersey, you probably will want to read this article. Actually, everyone who is worried about whether their employer is making their pension fund payments as required by contract and law, should read this.
No matter whether Governor Chris Christie wins or loses a New Jersey Supreme Court case on his $1.6 billion pension payment cut, the municipal-bond market sees his state’s credit suffering.
As New Jersey grapples with a growing retirement burden and a record nine downgrades, investors are demanding the most extra yield since at least January 2013 to own its bonds instead of benchmark munis, according to data compiled by Bloomberg.
Bondholders are souring on the state’s fortunes as the court is poised to rule as soon as this month on whether the second-term Republican and potential presidential candidate must make full pension contributions after he cut payments for this fiscal year amid a revenue shortfall. While a decision in his favor would avert a sudden budget crunch, it would exacerbate a pension-funding deficit that’s restraining spending on schools, tax relief and municipal aid.
“There are negative credit implications either way,” said Joseph Pangallozzi, a managing director at New York-based BlackRock Inc., which oversees $114 billion of munis. “If the court rules against the administration, they have to come up with the money fast. If they rule with the administration, there is still no concrete long-term plan in place for addressing the unfunded liability.”
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