The big news in New Jersey is the passing of the record $46.3 billion state budget. That is a 15% increase in spending over last year. As reflected in numerous reports, the passing of the budget was a typical backroom Jersey political deal, with little notice to the public, little debate and input only from the political bosses. That passes for the New Jersey budget process: backroom deals sealed with millions in pork. It’s sad to see that nothing has changed despite the gusher of money from the federal government.
The most unfortunate aspect of this budget is that it is not sustainable. It does not put New Jersey on a path to future prosperity. It largely kicks the big problems down the road while spending on the here and now. After all, there are legislative and gubernatorial elections this fall.
Sunlight would make three major points:
- The state is paying down $2.5 billion of debt. Normally, we would see this as a positive, but in this case, Gov. Murphy used his emergency powers last year to borrow $3.7 billion of very expensive debt with very high interest payments. It is effectively this money that is being used to pay down debt. So the state is borrowing to pay down debt. This does not reduce NJ’s overall debt burden and likely replaces cheaper debt with more expensive debt. This is not a sustainable model.
- The state is making a record $6.7 billion pension payment, which is more than is required and will reduce NJ’s massive unfunded liabilities. A very little. Without the gusher of federal money in the future, NJ will find it very difficult to devote 15% of the entire budget to pensions, which remain unreformed. Until the pensions are reformed, this is not a sustainable model.
- As NJ Chamber of Commerce President Tom Bracken said: “What does this budget do to revitalize our economy?” Sure, there are a lot of government transfer payments, lots of pork and a small amount of debt pay-down, but NJ has had one of the worst recoveries from the pandemic shut-downs in the nation. We are still hundreds of thousands of jobs short. Small businesses are struggling to find workers. Tax rates remain some of the highest in the nation, having just been raised again last year. As Sunlight has often said, NJ has a serious outmigration problem. People, businesses and wealth are leaving the state. This budget does nothing to reverse that. This is not a sustainable model.
So the bottom line is that while all this cash will ameliorate the pain this (election) year, it does nothing to put NJ on a more sustainable path. Instead, it raises the bar with record government spending while not addressing NJ serious structural problems. The can is being kicked down the road. Again.