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.
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 2017 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.