State Budget Practice Report Cards and Budget Resource Guide
Reflecting decades of underfunding public worker pension and other postemployment benefits (OPEB), principally health care, New Jersey was one of only seven states to receive a D-minus average, the lowest possible grade, in legacy costs for fiscal 2015 through 2019. In budget maneuvers, the state was one of just four receiving a D average, with neighboring Pennsylvania the sole state ranking lower.
Although New Jersey has increased its pension contributions in recent years, its 2019 appropriation was still only 61 percent of the actuarial recommendation. That year, New Jersey had the second-worst-funded state pension system in the US, with assets equal to 40 percent of promised benefits, up from 31 percent in 2016. It also failed to provide annual contributions for OPEB in line with actuarial recommendations and instead funded its $13.8 billion net liability on a pay-as-you-go basis.
New Jersey’s budget maneuvers grade reflected numerous one-time actions to cover recurring expenditures and achieve balance. From 2015 to 2018, the state used the sale of assets and up-front revenues on financing transactions to shore up the budget, covered recurring expenditures with debt, deferred expenditures, and shifted revenues from special funds into the general fund to pay for recurring costs.
The state made fewer one-time moves in 2019. It continued to rely on transfers from special accounts to bolster the general fund, however, including shifting $82 million from the state’s Clean Energy Fund to cover New Jersey Transit utility costs that are usually paid from general fund dollars. Another $47.5 million from the energy fund was used for utility costs in state facilities. The state also shifted $179.5 million to the general fund from the New Jersey Turnpike Authority—although that was $13.5 million less than in fiscal 2018.
New Jersey’s shortcomings in the budget forecasting category, which resulted in a D average, have remained constant through the study period. It does not use the consensus method of revenue forecasting, and budget documents fail to provide multiyear projections for revenues or expenditures.
To emphasize the need for clear and comprehensible budgets to inform citizens, promote responsible policymaking, and improve fiscal stability, the Volcker Alliance in 2016 began a study of budgetary and financial reporting practices of all fifty states. The Volcker Alliance’s mission is to improve the effectiveness of the administration of government at all levels. Making state budgeting more transparent and accountable is an important part of that goal.
The report cards found here contain grades of the state's budgetary practices during the fiscal years of 2015 through 2019. Each state received marks in five critical categories, based on their adherence to best practices in several key budgeting indicators. The five categories covered methods used to achieve budgetary balance as well as how budgets and other financial information are disclosed to the public.
States received grades of A to D-minus (there are no “failed states”) for their procedures in estimating revenues and expenditures; their use of one-time actions to balance budgets; how they oversee and use rainy day funds and other fiscal reserves; the adequacy of their funding of public worker retirement and other postemployment benefits; and the quality of transparency of budget and related financial information. The grades are based on research conducted by public finance and budgeting professors and students at eight US schools of public administration or policy. The universities’ research efforts were augmented by Volcker Alliance staff, data consultants at Municipal Market Analytics, and special project consultants Katherine Barrett and Richard Greene.
State Budget Sources
State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses is a resource published by the Volcker Alliance designed to help public officials, policy advocates, journalists, academics, and concerned citizens fully understand the critical fiscal decisions that governors and legislators must make. The guide includes the links below to budgets for this state as well as legislative analyses of budget bills and treasurers’ or comptrollers’ monthly state cash-flow statements; capital spending plans; reports on public-worker pension funding and returns; and reports by local and national fiscal research organizations, bond rating firms, and associations of state fiscal and finance officials.