New Jersey

State Budget Practice Report Cards and Budget Resource Guide

With the worst-funded state pension system and a long history of failing to make actuarially determined contributions to help shore it up, New Jersey landed a D-minus for legacy costs in fiscal 2017 through 2019. It was one of only seven states to receive the worst possible grade in the category, which includes public worker pensions and other postemployment benefits (OPEB), principally health care.

While New Jersey has been increasing appropriations for pensions, its fiscal 2019 budget appropriated only 60 percent of the actuarially determined amount—far short of the annual sum needed to achieve full funding over time. According to data compiled by Bloomberg, the state’s unfunded pension liability was equivalent to $14,515 per person in 2018, almost a third more than the per capita liability in Illinois, which has the second-worst-funded state pension. A lack of actuarially recommended contributions also left New Jersey with an unfunded OPEB obligation of $90 billion in 2018. 

Dependent on one-time actions to balance budgets, New Jersey scored nearly as poorly in budget maneuvers as in legacy costs, netting a D average for the three-year period. The state showed some improvement in 2019 as it avoided the use of debt to cover operating costs and did not defer recurring expenditures. But balancing the budget still required an estimated $200 million in one-time funds generated by a tax amnesty program and additional transfers from special funds, including about $130 million from the Clean Energy Fund. 

The state’s best scores were B averages in reserve funds and transparency. 

Download Printable State Report Card

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 presented here are taken from the 2020 Volcker Alliance report, Truth and Integrity in State Budgeting: The Balancing Act, which proposes a set of best practices for policymakers. For those wishing to gain greater insight into state fiscal issues, the accompanying budget resource guide is derived from the Alliance publication State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses (2016). 

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