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Standard & Poor's downgraded New Jersey's debt rating today, saying Gov. Chris Christie's last few budgets have been built on shaky revenue assumptions.

(Saed Hindash/The Star-Ledger)

TRENTON — Financial analysts at Standard & Poor's downgraded New Jersey's debt rating today, flagging Gov. Chris Christie's budget practices as something that should give pause to investors.

While noting that the state economy has been growing steadily in recent years and has several bright spots that could help in the long run, the Wall Street rating house had tough words for the Republican governor, saying he has a habit of building budgets on rosy economic forecasts.

As a result, tax collections tend to lag by hundreds of millions of dollars every year, punching holes into the state budget and forcing Christie to use stopgap fixes, the analysts aid.

"Almost five years after the official start of the economic recovery, New Jersey continues to struggle with structural imbalance and stands in stark difference to many of its peers who registered sizeable budgetary surpluses in fiscal 2013," the S&P analysts wrote in a note to investors today.

S&P downgraded New Jersey’s debt by one notch, from AA- to A+. The agency previously downgraded the state’s bond rating in 2011. Each time it goes lower, it drives up the cost of borrowing for major projects such as schools and roads.

John Sugden, an analyst at S&P who studies New Jersey, said the "measures used by the state state to balance the budget will contribute to future budgetary pressures."

The new rating is the fifth-highest S&P assigns. The shift means New Jersey’s debt has gone from what is considered to be high grade to an upper medium grade.

Kevin Roberts, a spokesman for Christie, said the Republican governor has made "historic" changes to repair the state’s strained pension system for public workers and has fought to keep down state spending.

From 2010 to 2011, Christie and the Democrats who control the Legislature agreed to make larger payments every year to the pension fund, which currently is underfunded by $52 billion. In the $34.4 billion budget plan now under consideration for the coming fiscal year, the payment is set to rise to $2.25 billion, the largest ever.

Christie and Democrats also agreed to increase what public workers pay each year for their retirement and medical benefits. The retirement age was raised to 65, and yearly cost-of-living adjustments were frozen.

The Democratic lawmakers who chair the Legislature’s budget committees, State Sen. Paul Sarlo (D-Bergen) and Assemblyman Gary Schaer (D-Passaic), laid the blame for the downgrade on Christie, who has the final say on how much revenue the state builds into the budget.

"For five years, we have seen budgets enacted that mortgage our future to finance the present," Schaer said.

"The report explaining the decision issued by Standard & Poor’s confirms what we have been saying all along," Sarlo said.

Roberts said S&P’s downgrade was a wake-up call that supports Christie’s push for further changes to the pension system.

"Even with Governor Christie’s historic bipartisan reforms to lower pension and health benefit costs and his commitment to make the two largest pension payments in history, S&P’s action today actually underscores what the governor has been saying since January – the rising costs of pension, health benefits and debt service challenge our long-term fiscal health, and requires further reforms," he said.

"In light of the negative effect of S&P’s action on New Jersey taxpayers, it’s time for the Legislature to come to terms with the reality of the problem and commit themselves to further reforms."

The two other major credit-rating agencies, Fitch Ratings and Moody’s Investors Service, have recently warned that they, too, may downgrade the state if New Jersey doesn’t alleviate the pressure on its budget.

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• Fitch criticizes Christie's new budget; lowers NJ debt outlook to negative

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