(Reuters) - New Jersey's credit ratings were downgraded on Tuesday by Fitch Ratings, which cited expectations the state's finances will "significantly weaken" due to the coronavirus outbreak.
The state's general obligation rating was lowered one notch to A-minus with a negative outlook, affecting about $1.6 billion in outstanding bonds. Ratings on other state-related debt were also cut a notch to BBB-plus.
"Despite progress made under the current administration, New Jersey's history of structurally imbalanced financial operations, as reflected in the persistent underfunding of liabilities, slim reserves and an elevated long-term liability burden, leave the state in a weak position to address the severity of the current downturn," Fitch said in a statement.
Like in many other states, New Jersey businesses and services have been shuttered in an effort to stop the virus' spread, leading to high unemployment and low consumer spending.
On Monday, Governor Phil Murphy said "expenses have skyrocketed at the same time our revenues have fallen off a cliff." He added that he was pursuing a state borrowing through the Federal Reserve.
The central bank announced earlier this month a $500 million program to aid states, large cities and counties by buying their bonds with maturities of up to two years.
New Jersey became the first state to extend its fiscal year in the wake of the pandemic, pushing back the original end date of fiscal 2020 by three months to Sept. 30, 2020.
Like New Jersey, other states and local governments are looking to the federal government to help fill big budget holes caused by the fallout from the virus.
While the governments were shut out of the latest relief bill working its way through Congress, U.S. President Donald Trump said on Tuesday he would discuss additional aid for them after the legislation passes.
Last week, Fitch downgraded another fiscally shaky state, Illinois, to BBB-minus, a notch above junk.