The explanation of New Jersey’s bond rating downgrade by Fitch begins:
The downgrade of the state’s GO rating to ‘AA-‘ from ‘AA’ reflects the mounting budgetary pressure presented by significant and growing funding needs for the state’s unfunded pension and employee benefit liabilities, particularly in the context of a weak economic recovery, a high debt burden, limited financial flexibility, and persistent structural imbalance.
It was the employee benefit liabilities yet only two months ago the State Senate president assured us that the recent reform ‘clearly fixes the problem.”
Why wouldn’t Fitch believe him? Because Stephen Sweeney was lying, not intentionally, but because he is unqualified to discern the truth.
Unfortunately at most levels of government in New Jersey you get elected by getting the most people to give you the most money to put up the most signs to lure the most voters. To get that money you must be willing to repay your donors and you will only get that money if your donors feel they are assured of a return on their investment (i.e. the candidate they back has to do what they tell him).
And keep in mind Senate president Sweeney is near the top of government. Consider those hundreds of decision-makers on Councils and Authority Boards who have little more qualification for their position than obeisance to their political patrons.
I could cite several examples from Solar Panels to debt restructurings where vested interests looking to make a killing gulled hapless politicians into rubber stamping their schemes but here is a recent instance: The RVSA board decided to add on to an incinerator in Union County on the advice of a handful of ‘professionals’, all of whom made out handsomely.
They spent $36 million and it turns out that running the addition costd more money than it would save so it sits idle. However, not idle are the connected lawyers who are now suing everyone involved (except the politicians).
More debt for nothing and the only response is (and will be) to blame the advisers whether they be the engineers, architects, or actuaries when the finger should be pointed at the people’s representatives unqualified for their real jobs.
Fitch sees it and they properly disregard Sweeney’s ravings. It was not really the level of debt that Fitch was downgrading but rather the clueless Sweeneys in this state who are responsible for that debt.