Moody's: Christie's NJ pension win won't fix budget mess

Moody's Investor Service analyst Baye Larsen says New Jersey Gov. Chris Christie's victory in the New Jersey Supreme Court pension funding case gets him off the hook for this year's budget -- but it won't rescue the state from long-term insolvency, and it's not likely to help New Jersey's state credit rating, the second-worst after Illinois, which has added millions to taxpayer financing costs. Writes Larsen:

"The New Jersey Supreme Court has decided that pension contributions are not contractually protected. This decision has reduced the risk of sudden late-year liquidity and budget pressure, but perpetuates severe pension underfunding and rapid growth of state liabilities.

"In the near term, this decision stabilizes the state's fiscal 2015 financial position because it eases the risk of a late-year liquidity and budget shock, and preserves the state's expected budget flexibility for fiscal 2016. However, long term, this reinforces the state's ongoing reliance on one-time budget solutions and will perpetuate large structural imbalances  and a rapidly increasing pension burden."