(Bloomberg) -- New Jersey’s total debt climbed 6.5 percent to $84.9 billion in the last fiscal year, largely because of rising obligations for pensions and retiree benefits.
Bond debt increased less than 1 percent to $41.8 billion in the year ended June 30, according to an annual debt report released on Friday. Other obligations, which mostly consist of pensions and post-employment benefits, climbed 12.6 percent to $43 billion.
The report shows that for the first time, New Jersey’s non-bond obligations exceed its issued debt.
Governor Chris Christie, a Republican, has said his 2011 pensions and benefits overhaul didn’t go far enough to contain costs, and has called for more unspecified cuts. New Jersey’s swelling pension obligations have contributed to eight credit-rating downgrades under Christie, a record for a chief executive of the state.
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“Despite real reforms that reduced aspects of our long term debt, post-retirement pension and health benefits continue to be unsustainable,” said Joseph Perone, a spokesman for the state Treasury Department. “Substantial reform in this area is necessary so that our debt can be made more affordable.”
Pension Overhaul
During his first term, Christie signed legislation requiring workers to pay more for pensions and health benefits. He also froze cost-of-living raises and signed a law requiring the state increase pension payments to reach full funding by fiscal 2018. The governor abandoned the latter component to close budget deficits after revenue fell short of his targets.
Christie’s failure to make the full contribution contributed to the non-bond obligation increase, James Petrino, director of New Jersey’s public-finance office, said at a meeting of the state Commission on Capital Budgeting and Planning in Trenton, where the report was released.
In November, Moody’s Investors Service cited “threats to effective pension reforms” among reasons for giving New Jersey a negative outlook. Reducing payments in fiscal 2014 and 2015 makes meeting future funding requirements more difficult, the ratings company said. Fitch Ratings also assigned a negative outlook, citing “pension challenges” and “lagging economic and revenue performance.”
Christie, who took office in 2010, pledged to reduce the pace of New Jersey’s borrowing. In fiscal 2013, debt rose 4.1 percent as his administration borrowed for the Transportation Trust Fund, which finances roadwork.
The increase in fiscal 2014 was the smallest in seven years, according to the report. General obligations totaled $2.16 billion in 2014, down from $3.13 billion in 2006.
Even so, a jump in borrowing is to come. The state issued $2.7 billion in bonds between the end of fiscal 2014 and Feb. 1, according to supplemental information in the report. About half was for the transportation fund, which will run dry next year as all of the gasoline tax that funds it goes toward debt service. Christie has yet to say how he will replenish the fund.
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