Moody's Investors Service yesterday confirmed New Jersey's Aa1 general obligation bond rating, but said the state faces a $2 billion gap in fiscal 1996.
The rating action affects $3.95 billion of GO debt and as much as $7.8 billion of tax-supported securities.
Moody's comments come as the state prepares to sell $59 million of GOs. The state is scheduled to price the issue today through a competitive bid.
Efforts by Coy. Christine Todd Whitman to cut state income taxes by 30% during the next four years forced the state to use one-shot revenue-raisers to balance its fiscal 1995 budget, which began July 1.
But New Jersey cannot count on these revenues for fiscal 1996. As a result, the state is experiencing a budget shortfall of $2 billion in its next fiscal year, Moody's said.
"To offset the immediate revenue loss of the tax cuts, the budget for fiscal 1995 is balanced by continuing reliance -- although at a reduced level -- on nonrecurring measures and by spending cuts," the rating agency said in a press release.
New Jersey's use of one-shots peaked in fiscal 1994, when the state, under then-Gov. Jim Florio, used $1.5 billion of such revenues to balance its budget, said Robert Kurtter, a vice president in public finance at Moody's.
The Whitman Administration contends that it has relied on just $887 million of one-shots in its fiscal 1995 budget. Moody's puts the number at $1.2 billion, including $350 million in increased debt service costs.
"However you count it, the amount of nonrecurring revenues is a significant amount but a reduced amount from the peak in 1994," Kurtter said.
NeW Jersey officials said they are pleased with Moody's action, despite the rating company's concerns about one-shot items. State finance officials said the budget gap will not prevent Whitman from balancing the fiscal 1996 budget and continue with her planned tax reductions. "The fact that Wall Street has reaffirmed our ratings shows that it is supporting Gov. Whitman's efforts to improve the state's financial health through budget actions," said Lisa Kruse, director of communications in Treasurer Brian Clymer's office.
In August 1992, Moody's lowered New Jersey's GO bond rating to Aa1. In yesterday's press release. Moody's based the downgrade on "sizable" non-recurring resources, which have become "a regular feature of New Jersey budgets."
The $2 billion budget gap led Whitman last month to lengthen her timetable for the 30% tax cut to four years from three. Last year, the state cut income taxes 5%, and this year will cut them 10%.
Standard & Poor's Corp. affirmed its AA-plus rating on New Jersey's outstanding GOs on Nov. 9.