A national task force has recommended New Jersey improve its budget process.
The State Budget Crisis Task Force released a report on budget challenges facing states in July and this month released a report focusing on New Jersey's budgetary issues.
Spending on education and Medicaid dominates the state's budget, the report's authors wrote.
Since the mid-1990s the state has underfunded its pension system. The state has also not set aside money for anticipated future costs of retiree health benefits, resulting in a combined unfunded liability of $84.8 billion. This compares to the state's approved total appropriations of $31.7 billion in fiscal year 2013.
"The unfunded liability would be higher still, but for recent action by the governor and legislature to eliminate cost of living adjustments for future and current retirees, increase employee contributions, and raise the retirement age," the authors wrote.
Sales and income taxes account for 64% of the state's revenue. "The sales tax has a very narrow and eroding base: food, clothing, and many services go untaxed, and tax revenue from expanding internet sales is difficult to capture, damping revenue growth," the report said.
New Jersey "will need at least $133 billion for transportation, wastewater treatment, and drinking water [infrastructure projects] over the next ten years. It has other critical needs for higher education, solid waste disposal and a wide variety of energy-related projects."
The report makes seven recommendations for change:
- Engage in multi-year planning and budgeting.
- Strengthen and fund the state's Rainy Day Fund.
- Present the annual budget in a gross budget format so that federal and dedicated funds are included as part of the annual budget recommendation.
- "Strengthen the state's capital planning and develop a strategy to fund critical infrastructure.... Including all long term needs in one annual multi-year plan would strengthen the process and highlight total infrastructure needs."
- Review the state and local government tax and spending structure. "One effective way to do this is to establish a non-partisan or bi-partisan tax policy and spending commission."
- Provide necessary funding for the pension systems. The state has approved a plan to "ramp" up funding of the systems over seven years. "It has met the requirements for the first two years but funding requirements will increase substantially over the next five. The state will face difficult choices about spending priorities and taxes if it follows this payment schedule."
- Monitor and control the costs of retirement health systems.