New Jersey officials this week purchased a new AAA rating from Fitch Investors Service, hoping to show investors that despite months of upcoming budget uncertainty the state is still worthy of its reputation as the top GO credit in the region.
The move came in conjunction with a $413 million general obligation issue priced yesterday, the state's first since Standard & Poor's Corp. lowered its rating to AA-plus from AAA last July amid concern over budgetary one-shots.
Lawrence Singer, New Jersey's director of public finance, said yesterday the decision to ask Fitch for a rating had less to do with the loss of Standard & Poor's triple-A than the threats from Trenton to roll back about $2.8 billion in unpopular tax increases instituted last year.
"We felt it was appropriate to get another set of eye, to ask Fitch to take a completely fresh view of what's going on in the state of New Jersey," Mr. Singer said. The move marks the first time New Jersey has requested a Fitch rating, the agency said.
New Jersey's lameduck Legislature has muddied the state's fiscal waters in recent weeks, proposing legislation that would dissolve almost $3 billion in taxes unless the incoming Republican-controlled Legislature votes to continue them.
In its assessment, Fitch said the tax proposals would force "potentially difficult financial decisions," but noted the state has a balanced budget requirement and a history of strong credit fundamentals.
Claire G. Cohen, executive managing director at Fitch, said New Jersey is facing the same recessionary pressures as the rest of the country, and a shortfall in the fiscal 1992 budget is likely. "But they've always taken action to bring things back into balance," Ms. Cohen said.
She added that talk of major tax repeals could be "disruptive," but a "reasonable compromise" is likely given the state's history of prudent management.
In his first policy statement about the tax repeal debate, Gov. Florio said yesterday he would evaluate any proposal based on whether it threatens fiscal stability, property tax relief programs, or the education system.
In a taped television appearance scheduled to air locally tonight, the governor said he would gladly repeal the taxes as long as suitable substitutes are proposed.
Moody's Investors Service has assigned New Jersy an uninterrupted Aaa since 1977. The Standard & Poor's downgrade was the first for the state in at least 40 years.