Elected officials nationwide are grappling with the cost of retirement benefits even as tax revenue recovers more than four years after the 18-month recession that ended in 2009. New Jersey has the fifth-biggest net pension liability among U.S. states, according to Moody’s, which gave the state a negative outlook in December. The state has the same outlook from Standard & Poor’s and Fitch Ratings.

Rating Cuts

The companies each cut New Jersey one level since Christie, 51, took office in January 2010, grading it three steps below top-rated munis.

Kevin Roberts, a spokesman for Christie, said by e-mail that the governor was confronting years of poor management.

“It was Governor Christie’s leadership that spurred the most far-reaching and important reforms for controlling the cost and stability of the pension system in history,” Roberts said.

Yields on an index of debt from New Jersey issuers averaged 3.31 percent on March 28, compared with 2.94 percent for Connecticut, S&P Dow Jones Indices show. S&P ranks Connecticut one level higher than New Jersey, while Moody’s grades them the same. In Moody’s 2013 ranking of state pension burdens, Connecticut placed seventh, two steps below New Jersey.

2011 Overhaul

New Jersey’s pension change will use employee contribution requirements enacted in a 2011 benefits overhaul, a move that reduces the state’s recommended payment for this fiscal year and next.

“Anything that cuts the payments is a concern because of how much there is to make up,” said Solender, whose firm oversees about $15.5 billion of local debt.

Christie’s need to “retroactively recalculate the amounts indicates that the state’s financial position is weaker than expected and that more typical budget-balancing solutions have already been exhausted,” Larsen wrote.

Chris Santarelli, a spokesman for state Treasurer Andrew Sidamon-Eristoff, said the revision follows “standard actuarial practice in using employee contributions to offset employer contributions to the pension system.” The change was analyzed by actuarial consultants and accepted by members of the public pension boards, he said in an e-mail March 25.

‘Minor Effect’

“The change in methodology has a minor effect on the funded ratio over decades and we feel that the savings in payment for the state and locals is justified,” Santarelli said.

Moody’s cited a “sluggish economic recovery” and a growing pension burden in reducing its outlook on New Jersey in December.

“The state continues to use one-time fixes that indicate above-average financial weakness,” Larsen wrote last week.

Only Illinois and California have lower Moody’s ratings among U.S. states.

Christie’s proposed $34.4 billion budget for fiscal 2015 includes a record $2.25 billion pension payment. His administration has made contributions totaling $5.3 billion, more than double the $2.4 billion put into the system in the prior 10 years, Santarelli said.

New Jersey’s pension deficit reached $53.9 billion in 2010 after the state expanded benefits and skipped payments over a decade. The gap fell to $36.3 billion after Christie signed bills to boost employee pension and health-care contributions, raise the minimum retirement age for new workers and freeze cost-of-living adjustments. It rebounded to $47.2 billion as of July 1, 2012, as Christie made only partial contributions.

Christie, a potential 2016 presidential candidate, said in February that the pension deficit had since climbed to $52 billion. He said his benefits overhaul didn’t go far enough, and he is seeking another round of cost cutting.