Report Warns Of Difficult Financial Choices Ahead For NJ

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STATE – While Gov. Chris Christie has received praise for cutting costs and overhauling the state’s pension system, it won’t be enough to prevent New Jersey from needing to make increasingly difficult choices in upcoming years.

A report released today by the State Budget Crisis Task Force, a group of economists and state budget experts, found that New Jersey will need to find nearly $10 billion more over the next five years to keep pace with the growth of school, healthcare and public worker retirement benefit cost growth.

New Jersey has an unfunded liability of $84.8 billion for public worker retirement benefits, a figure that would be even higher except for Christie’s unpopular choice to eliminate cost of living adjustments for future and current retirees and make other changes to the pension program. In the current budget, the state is making a $1 billion contribution to the pension program. That will have to increase by as much as $4.5 billion between 2013 and 2018, according to the report.

Another area of concern is rising education costs. In the FY 2013 budget, New Jersey is spending $11.7 billion – 37 percent of all state spending – on education aid to school districts. That figure has increased $1.7 billion – 16 percent – over just the last two years.

“The state has relied heavily on nonrecurring resources to balance its budget,” the report notes. “In 2003 nonrecurring resources accounted for 14 percent of total appropriations, and as recently as 2010 nonrecurring resources accounted for 13 percent of appropriations — in 2013 it was 4 percent of appropriations.…These practices have led to structurally unbalanced budgets in which current revenues do not support continuing spending commitments. This pushes difficult budget choices off to future years and is ultimately unsustainable.”

Efforts to reduce the federal budget deficit are also likely to have a major impact on New Jersey, the report notes. “The 2013 state budget includes $12 billion in federal funds. If the federal government cuts aid to state governments — as seems likely, eventually, if it makes any serious effort to reduce the deficit — the state could have a large and immediate loss of resources. A 10 percent reduction, for example, would cost the state $1.2 billion.”

In addition, New Jersey will need at least $133 billion for transportation, wastewater treatment, and drinking water over the next ten years, the report estimates.

The report recommends that the state move to multi-year budgeting to make the long-term consequences of budgetary decisions more clear, review the tax structure, and monitor and control retiree health benefit costs.

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