NEW YORK (TheStreet) - Fitch Ratings said Wednesday it could cut New Jersey's bond rating after Governor Chris Christie proposed to slash the state's contributions to its pension system as part of its annual budget.

The rating agency said it viewed Christie's budget proposal as a reversion to the governor's prior practice of balancing New Jersey's budget by creating larger shortfalls in the state's pension system. As New Jersey's finances recover from the Great Recession, Fitch believes the state should be repairing the finances of its pension system and not treating it as a source of cash.

"Fitch views this reversion to prior practices - cutting pension contributions as a way to balance the state's budget - as a form of deficit financing that is of particular credit concern at a time of economic recovery," the rating agency said.

The agency holds New Jersey at an 'A+' rating with a negative outlook. Fitch characterized New Jersey's pension proposal as a "credit negative" on Wednesday.

Currently, Fitch estimates that New Jersey will face a budget gap of over $1 billion for fiscal 2014, given disappointing income tax payments in April.

With few options to cover the state's budget shortfall this late in the fiscal year, Christie has proposed that New Jersey cut pension contributions by $1.57 billion in 2015. That proposal indicates Christie's administration would again rely upon pension contribution cuts as a primary means to close the state's budget shortfall.

"This once again displays an inability to deliver a recurring solution to the state's budgetary imbalance and further delays action to align the state's revenues and expenditures," Fitch said.

The agency also characterized New Jersey's current pension contributions as "inadequate," meaning further cuts would only make the state less-prepared to meet long-term liabilities.

"I think at this point it's just a way for them to avoid coming up with a recurring solution to the budget gap," Marcy Block, a senior director at Fitch Ratings, said in a phone interview from New York. "The other part is what they are going to end up affecting on the pension side .... what ends up happening is the unfunded liability will grow large, so it's increasing a somewhat unstable situation on the pension side."

Previously, New Jersey had committed to phasing in increases in pension contributions to the system to meet actuarial minimums.

"The proposal retreats from the state's statutory commitment to phase in increases in its contributions to the system to the full actuarially required contribution. This in turn would result in additional increases to the state's already high unfunded pension liability," Fitch concluded.

The Governor's office couldn't immediately be reached for comment.

-- Written by Antoine Gara, with Joe Deaux in New York.

Follow @AntoineGara