TRENTON, N.J. (AP) -- The New York financial ratings agency Standard & Poor's lowered its outlook on New Jersey from stable to negative on Tuesday, based on the state's continuing budget imbalance and revenue projections for the fiscal year that began July 1.
S&P did not revise its ratings on the state's general obligation bonds or other debt, citing New Jersey's credit-worthiness and commitment to repaying its debt obligations. But the agency warned that a future downgrade is possible.
The downgrade was the latest financial setback for Gov. Chris Christie, who recently dropped the "New Jersey Comeback" slogan he had trumpeted since January.
"We revised the outlook to reflect our view of the risk of revenue assumptions we view as optimistic, continued reliance on one-time measures to offset revenue shortfalls, and longer-term growing expenditure pressures," said S&P credit analyst John Sugden.
The pressures include increasing obligations to the government worker pension fund, more Medicaid funding and debt service.
At a town hall meeting later Tuesday in Elmwood Park, Christie said he will not back off his push for tax relief.
"We're not raising taxes in New Jersey on my watch," the governor said.
Earlier, Treasury spokesman Andy Pratt predicted S&P's analysis would be "unconvincing" to investors because it is "out of step" with other ratings agencies. He said the state's economy has continued to rebound under Christie's leadership. Christie has based his budget on projected revenue growth of more than 7 percent.
Moody's affirmed New Jersey's bond rating and stable outlook on Monday; Fitch was first to do so on Friday.
But New Jersey Democrats said the S&P report is further proof that the Republican governor's policies have failed.
Senate Majority Leader Loretta Weinberg said Christie's economic legacy includes the worst unemployment rate in 35 years, the third worst economic performance rating of the 50 states, the second-worst mortgage foreclosure rate in the country and a 20 percent rise in property taxes.
The S&P downgrade came the day before Democrats in the Assembly are hoping to get a clearer picture of the state's fiscal situation from the Christie administration at a hearing Wednesday.
"We need to know where we stand," said Assembly Budget Committee Chairman Vincent Prieto, a Hudson County Democrat. "The quicker we find out, the better we can adjust."
The administration had planned to wait until December or January to give a fiscal year-end report, but Prieto said with 88 percent of tax collections already in there's no sense waiting.
"If we're a quarter of a billion dollars off, we need to know now," he said.
David Rosen, the Legislature's budget analyst, has said he expects the state will close its books for the last fiscal year $254 million below projections. Rosen told lawmakers as much last week, but Christie dismissed Rosen's estimate as he has in the past. Falling below projections by a quarter billion dollars would not be good news for the state, but it wouldn't be catastrophic considering New Jersey's overall spending is $32 billion.
Christie and the Legislature have locked horns since spring over whether to fund a 10 percent tax cut. Christie has demanded that the Legislature commit to funding the first phase of the cut in January, but the Democrat-led chambers have insisted on putting that off until 2013 to determine first if the state can afford it. The latest revenue report puts the tax cut in greater peril.
"We want to be optimistic but we have to be realistic," Prieto said. "This shows that the wait-and-see approach was the right thing to do. The assumptions of growth have not been there."
S&P also assigned a negative outlook to nearly $400 million in outstanding construction bonds and notes for school facilities but kept its A+ rating.
Associated Press writer Katie Zezima contributed to this report from Elmwood Park, N.J.