Sunlight wanted to comment on a recent report from former-Senate President Steve Sweeney’s Center for Public Policy at Rowan University. The report is the work of a bipartisan Multi-Year Budget Workgroup and constitutes a valuable contribution to the discussion about New Jersey’s fiscal future. As we approach the beginning of FY2023, it is imperative that New Jersey lawmakers have a clear-eyed view of what our budget will look like after the federal pandemic money goes away and tax revenues fall off their record pace. It’s not a pretty picture and our elected leaders must take heed of this warning.
Here’s a brief summary of what the report says:
- “New Jersey is most likely facing a fiscal cliff in the years ahead ...”
- It is highly likely that state revenue collections from FY2024 to FY2027 will fall $10.5-$20.5 billion short of expenditures, which are projected to increase by 4.4% per year.
- Even if New Jersey devoted all of the record projected FY2023 surplus of nearly $12 billion to a rainy-day fund that would help close the budget gaps, ALL of the surplus would be used up by FY2027.
This last point is important because our current batch of lawmakers – led by our spendthrift Governor Murphy – will not devote the entire $12 billion surplus to a rainy-day fund. There are too many goodies to be passed out to favored constituencies and future voters. So thanks to Murphy and the legislature’s spending binge, if a revenue shortfall occurs, New Jersey will return to its historical pattern of budget deficits. Will the state then resort to the same old stop-gaps like underfunding pensions or borrowing debt?
The sad thing is that when New Jersey was flush with federal funds and record tax collections, we did not take necessary steps like restructuring the state pension system to a more sustainable condition, we just dumped billions of good money after bad in order to appease New Jersey’s most powerful special interest, the NJEA. That was good politics for Murphy and most of the Democrats in the legislature who benefited from the millions of NJEA political spending, but it was very bad for New Jersey.
Now Sweeney’s group is making clear just how bad it will be if a recession hits. That’s an invaluable and ominous warning that will likely fall on deaf ears.