(Reuters) - New Jersey's fiscal 2013 revenue projections may be too optimistic as long-term liabilities continue to cloud the state's credit picture, Fitch Ratings said on Thursday.
"Fitch believes there is notable downside risk in New Jersey's revenue budget for fiscal 2013 due to the level of economic uncertainty and recent modest growth in actual revenues," the rating agency said in a statement.
An underperforming economy and disappointing tax collections would be blows to Governor Chris Christie, a Republican, who has trumpeted the state's comeback.
"This has nothing to do with the state's credit rating, which Fitch affirmed last week," Andy Pratt, a spokesman for the New Jersey Treasury, said in an email.
Some of the state's problems - in particular, pension funding issues - are "legacies of past administrations" that Christie, a possible presidential contender in 2016, has worked to address, Pratt said.
Other states may also find that the uncertain economic recovery strains their budgets. State tax collectors cranked out a 10th straight quarter of gains in the April-June period, but the overall 3 percent rise from a year earlier marked further slowing of revenue improvements, a study said Wednesday.
The warning by Fitch follows Tuesday's revision in the outlook for New Jersey's general obligation bonds to "negative" from "stable" by Standard & Poor's, which also cited optimistic revenue assumptions.
New Jersey's unemployment rate is the highest it has been since 1977, rising in August for the fifth straight month to 9.9 percent, state labor officials said on Thursday. The national unemployment rate was 8.1 percent in August.
The state does enjoy some strengths; its economy remains wealthy and diverse, Fitch said.
But should the economic and revenue recovery falter, the state will find it harder to deal with two major problems: its high debt and significant and growing unfunded pension and employee benefits, Fitch said.
Though legislation was enacted to curb the growth of these costs, "continued pension funding level deterioration is expected," the credit agency said.
The pension plan was 60.8 percent funded, on an aggregate basis, as of June 30, 2011. The total amount of debt outstanding was 7.8 percent of preliminary 2011 personal income, as of June 30, 2012, Fitch said.
"When combined with the unfunded pension obligations, this figure increases to 16.3 percent, well above the 6.6 percent median for states rated by Fitch," the credit agency said.
(Reporting By Karen Pierog and Joan Gralla; Additional reporting by Caryn Trokie; Editing by Chizu Nomiyama and John Wallace)