Christie’s Cuts in Aid Imperil Moody’s Ratings for Six Cities

File this news brief under the title of "Collateral Damage" as a consequence of Governor Christie's numerous line item vetoes of the budget that Democrats sent him last week and the Democrat's unsuccessful efforts to override them.

By Elise Young - Bloomberg.com

Six New Jersey cities including the capital, Trenton, have their credit ratings under review for possible downgrade by Moody’s Investors Service after losing aid in Governor Chris Christie $29.7 billion budget.

The notice came hours after the Democrat-led state Senate failed yesterday to override Christie’s veto of $139 million in so-called transitional aid to some of the poorest cities.

Moody’s, in a report, said it placed Camden, East Orange, Passaic, Paterson, Trenton and Union City on a watch list and expected to finish its review within 90 days, a window during which the Legislature “may restore all or some of this aid.”

The company report called the aid loss a “credit negative” to those municipalities plus Bridgeton City, Harrison, Irvington and Prospect Park. “Credit negative” indicates Moody’s is more inclined to cut ratings.

The review of the six cities will involve a study of any plans to offset the loss of aid, which Christie cut to $10 million from $149 million for the fiscal year that began July 1.
“Given the magnitude of the adopted state-aid reductions and required process for implementing workforce reductions, we believe that city managers may be challenged to achieve the necessary savings quickly to prevent further financial decline,” according to the report.

Christie, 48, a first-term Republican, chopped almost $1 billion in budget items added by Democratic lawmakers, saying the state couldn’t afford the expenditures.

Most Downgrades

For Camden, with a Ba2 rating from Moody’s, or two steps below investment grade, transition aid of $69 million last year amounted to 38 percent of its spending plan. Paterson, with a Baa1 rating, or third-lowest investment grade, received $22.3 million last year, for 7 percent of its budget.

In May 2010, Moody’s lowered Trenton to A3, the fourth- lowest investment grade, after a previous Christie cut in aid. Communities in New Jersey, the second-wealthiest U.S. state, led the country in downgrades last year.

Kevin Roberts, a spokesman for Christie, declined to comment. Andy Pratt, a spokesman for Treasurer Andrew P. Sidamon-Eristoff, didn’t respond to an e-mail. Mark Albiez, chief of staff to Union City Mayor Brian Stack, who also is a Democratic state senator, didn’t return telephone calls. David Rousseau, a financial consultant to Trenton, didn’t respond to an e-mail....

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U.S. Jobless Rate Soared in January and Payrolls Kept Plunging

Shobhana Chandra
Bloomberg

Millions more U.S. workers are likely to lose their jobs after the economy’s freefall sent unemployment in January to the highest level since 1992 and payrolls tumbled, reinforcing the need for an economic stimulus plan.

The jobless rate rose to 7.6 percent from 7.2 percent in December, the Labor Department reported yesterday in Washington. Payrolls fell by 598,000, the biggest monthly drop since December 1974. Losses spanned almost all industries, from construction and manufacturing to retailing, trucking, media and finance.

“The scary thing is there is really no end in sight to the soaring jobless rate,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “It’s difficult to see what’s going to turn the situation around. This is the sort of catalyst that could get Congress to move” to agreeing on a compromise plan.

President Barack Obama, who predicted a “dismal” report, is pushing for a stimulus plan to revive the economy and create jobs, and is expected to announce a new effort to shore up credit markets. The rate of the job market’s decline means it’s unlikely government efforts will halt a collapse in consumer spending until the second half of the year, economists said.

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Obama Raised $66 Million in August, a Record for Single Month

Bloomberg is reporting that Barack Obama raised more than $66 million in August for his campaign against Republican John McCain, a one-month record.

...The haul may reassure some Democrats who have been worried that donations for Obama were starting to fall off. Obama has a greater fundraising burden than McCain because Obama decided to bypass public financing for the general election, banking on the idea that he can raise more than the $84.1 million grant and not have to abide by corresponding spending limits.