Credit agency warns of budget strain from gas-tax-hike plan

A plan by Republican Gov. Chris Christie and the Legislature to raise the gas tax by 23 cents could strain New Jersey's budget, a rating agency said Monday.

Moody's said the plan, which would also cut other taxes while establishing an eight-year $16 billion transportation trust fund, is a credit negative.

The Democrat-led Legislature passed the measure with bipartisan support Friday. Christie has not acted on the legislation, though he said he supports it.

The Assembly and Senate voted on the deal after Christie met with Democratic Assembly Speaker Vincent Prieto and Democratic Senate President Steve Sweeney and agreed to it.

The legislation would cut the sales tax from 7 percent to 6.625 percent over 15 months while phasing out the estate tax.

Moody's says the changes would carry a cost of $1.4 billion by fiscal year 2021, along with an average annual increase in pension contributions of $711 million through 2023.

"The annual revenue loss in future years will worsen the state's budget challenges," Moody's said in a statement.

Messages left with Christie's office and Democratic legislative leaders were not immediately returned.

Moody's statement is not a credit downgrade, but the agency says its outlook shows the possible effect the development can have on the state's credit.

The credit rating helps determine how costly it is for the state to borrow money for projects. Under Christie, the state's rating has been downgraded three times by each of the three major credit-rating agencies.