NJSpotlight’s John Reitmeyer does a good job (here) of highlighting NJ’s deficient Rainy Day funds and how NJ has been reduced to borrowing $5 billion to plug a massive gap in the state budget. He also rightly notes that state public pension payments are eating up funds that might otherwise be used to build a sufficient Rainy Day fund.
But the Rainy Day fund is only a symptom of the underlying problem, which is that NJ’s state budget is in perpetual, structural deficit. Every year, expenditures exceed revenues and NJ must come up with short-term fixes to close the deficit. As detailed in SPCNJ’s report “Beware the Downward Spiral,” the Pew Charitable Trusts determined that NJ’s structural budget deficit is the worst in the nation: from 2003-2017, NJ’s revenues only covered 91.3% of its expenditures, compared to a national average of 102.1%. It is impossible to build up sufficient surpluses if a state budget has a 9% structural deficit. This is why NJ is so ill-prepared.
Reitmeyer is correct that public pensions and health benefit payments by the state are contributing mightily to NJ’s fiscal imbalances. Senator Sweeney, SPCNJ and others have long warned that these payments represent a serious threat to NJ’s longer-term solvency. The NJEA and New Jersey Policy Perspective (heavily funded by the NJEA) say that the state must raise taxes more. But NJ is already one of the most highly taxed states and is already losing wealth, businesses and people to lower-tax states. Raising taxes more would be counterproductive.
The solution of course is to reform pensions and health benefits so that the state can afford the payments without running 9% deficits. And to increase revenues by making NJ a more friendly place to do business, given that NJ consistently ranks among the very worst business climates in the nation. But that would take a lot of political will to overcome NJ’s powerful special interests like the NJEA.