New Jersey Governance in the Middle of a Pandemic: Run by and for Special Interests
September 16, 2020Thanks, Governor! NJEA-Funded New Direction Repays the Favors with a $1.25 Million Ad Campaign
September 22, 2020According to the Star-Ledger, New Jersey’s FY2021 budget will borrow $4.5 billion in bonds. That’s more than 10% of the entire budget. Where is NJ going to get the money to plug the budget gap next year? I guess we should hope that economy does really well – despite the additional taxes on millionaires, corporations and health plans.
Importantly, NJ is making a $4.7 billion payment to our unreformed, worst-in-the-nation public pension system. So, in effect, we are borrowing to make the pension payment, rendering these bonds the functional equivalent of the disastrous 1997 pension obligation bonds (POBs). As with the POBs, the idea is to borrow $4.5 billion at 2% interest in the hopes that the proceeds will earn more than 2% as investments. But if they don’t, then its just an additional cost. There’s a reason why the legislature banned POBs.
In the end, the state is just kicking the can down the road. Rather than reform the broken pension system, we pour $4.5 billion of good money after bad. But this debt burden will be on the state rather than the pension system. To NJ taxpayers, it’s simply more debt they must repay. The costs are just pushed into the future. In the long run, this hurts NJ, its economy and its citizens.