By Kate King

S&P Global Ratings cut its rating for New Jersey's general-obligation bonds Monday, marking the state's 10th credit downgrade under Republican Gov. Chris Christie.

The downgrade stemmed from the state's rising pension liabilities along with an expected drop in revenue as part of a transportation-funding package signed by Mr. Christie, said David Hitchcock, senior director at S&P Global.

The New York ratings, data and index firm lowered New Jersey's credit rating to "A-" from "A" and assigned a negative outlook.

"Just as the state is pushing off some of their pensionscosts into later years, they are also pushing off some of their revenue loss into later years," Mr. Hitchcock said. "It's adding incremental pressure."

Credit ratings help determine the interest rates that states pay when they sell bonds; a lower credit rating means higher borrowing costs.

A deal reached in October between Mr. Christie and lawmakers increased New Jersey's gas tax by 23 cents, to 37.5 cents a gallon. The revenue will reduce the amount of money needed from the general fund to pay for transportation work. The deal also will phase out the estate tax and reduce the sales tax to 6.625% from 7% at a total estimated cost to the state of $1.4 billion by fiscal 2022.

The revenue losses from those tax cuts will likely take effect just as New Jersey needs to increase its contributions to public pension costs, Mr. Hitchcock said. S&P Global Ratings, which uses more conservative interest-rate projections based on widely usedaccounting principles, puts the unfunded public-pension liability at $98 billion. New Jersey pegs it at $43.8 billion.

A spokesman for Mr. Christie referred requests for comment to the state Treasury Department. Willem Rijksen, a department spokesman, said the downgrade shows the need for changes to public pensions and benefits, "which the governor repeatedly has said are necessary."

"Simple fact, our rating would be injured further if Governor Christie had not enacted reforms early in his Administration," Mr. Rijksen said in a statement.

In 2011, Mr. Christie and the Legislature agreed on a pension overhaul that increased public-worker benefit contributions. The governor promised to increase the state's annual payments to the retirement system but later scaled back those payments to avoid raising taxes.

On Monday, state Sen. President Steve Sweeney, a Democrat, said he is introducing legislation that would require the state to make quarterly pension payments.

New Jersey's credit rating has been downgraded 10 times by three rating firms during Mr. Christie's tenure. S&P Global Ratings has lowered the state's rating four times since February 2011.

New Jersey has the second-lowest credit rating issued by S&P Global in the U.S.; Illinois has the lowest, a BBB credit rating, and is also facing substantial pressure from pension liabilities, said Senior Director John Sugden.

"These fixed costs are squeezing out the ability of these budgets to absorb fluctuations in revenues and increased spending for other areas, such as education and, really, the rest of the budget," Mr. Sugden said.

Write to Kate King at Kate.King@wsj.com

(END) Dow Jones Newswires

November 15, 2016 02:48 ET (07:48 GMT)

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