New Jersey’s total bonded debt once again has gone down, with the latest year-over-year reduction bringing the amount owed to investors below $39 billion.
The updated accounting of the state’s bonded debt was included in a recently released annual comprehensive financial report prepared by the Department of the Treasury for the 2025 fiscal year.
How much the state owes bondholders — an estimated $38.6 billion as of June 30 — has a direct impact on taxpayers because debt service is typically a significant line item in state government’s annual budget.
This year, Gov. Mikie Sherrill is earmarking in her proposed budget more than $3 billion for the latest round of debt payments, according to documents released by her administration last month.
Despite the improvement on the bonded side of the state’s debt ledger – New Jersey owed bondholders more than $48 billion as recently as the 2021 fiscal year – Treasury’s latest accounting reveals other long-term obligations are rising, for which the state and its taxpayers are responsible.
The state’s nonbonded obligations, which include estimates of the long-term cost of pension and health benefits owed to public workers, increased by nearly $10 billion, year over year, according to the financial report for the 2025 fiscal year.
New Jersey’s total for both bonded and nonbonded obligations increased by about 4%, to $209.4 billion, as of the end of June, according to the financial report prepared by Treasury.
State policymakers in recent years have prioritized paying down bonded debt and fully funding pension obligations. Rising employee and retiree health care costs, though, have also become a growing cost-driver over the last decade, according to the budget documents released last month.
State government’s $60 billion budget has a share that’s due to increase by an estimated 10%, to $7.6 billion, to cover employee and retiree health benefits during the fiscal year that begins on July 1.
Over the last decade, such costs have increased by more than 80%, according to the budget documents.
Meanwhile, reports issued in recent weeks by a Treasury actuarial consultant have warned of significant health insurance premium increases that are looming for government retirees, current workers and dependents.
Treasury spokesman Darryl Isherwood cited “medical trends” as the largest cost driver when asked about the year-over-year increase in the long-term assessment of New Jersey’s post-employment retirement benefits included in the comprehensive financial report.
“Other factors include changes in discount rates, demographics and actuarial assumptions,” Isherwood said.
How well state government is managing its long-term obligations, including bonded debt and employee pension and health liabilities, is closely tracked by major Wall Street rating companies, whose analysts assign the state a credit rating relative to its borrowing.
Poor credit drives higher borrowing costs that are passed to New Jersey taxpayers.
The 2025 fiscal year was the fourth in a row to see an overall reduction in the state’s bonded debt, according to the report.
It also follows the 2021 establishment by then-Gov. Phil Murphy and lawmakers of a dedicated debt-relief reserve, which was used to retire an estimated $4 billion in bonded debt ahead of schedule, according to Treasury estimates.
Funds deposited in the same account – which has since been depleted — were also used in recent years to pay for planned capital projects, such as school construction and transportation infrastructure improvements, to preclude new borrowing.
During the last fiscal year, the state issued $4.9 billion in bonds, including $1.5 billion in new money issuances and $3.4 billion in refunding bonds, according to the financial report.
The state also made $4.6 million in principal and interest payments and realized $140.2 million in net present value savings, the report said.
However, state government’s long-term nonbonded obligations totaled $170.8 billion as of June 30, up from $161.2 billion a year earlier, according to the report.
This story is made possible in part by the Corporation for Public Broadcasting, a private corporation funded by the American people.
