New Jersey Still a Long Way from Recovery, Report Shows
Employment and revenue lag, while pension gap, debt, and infrastructure needs are high
By Mark Magyar, NJ Spotlight
The jump in New Jersey’s unemployment rate last month to 9.6 percent -- the farthest the state has been above the national average in 30 years -- is just the latest in a series of sobering statistics on the state’s economy and budget.
The 0.4 percent increase from May’s unemployment rate put New Jersey 1.4 percent higher than the national average of 8.2 percent, although the bad news was offset somewhat by a gain of 9,900 jobs during the month. But more troubling news came out of the State Budget Crisis Task Force report issued last week by a blue-ribbon panel of economists. It warned that New Jersey and other state governments faced looming fiscal crises in the years ahead that will require new revenues or draconian cuts.
No economic or fiscal report can be issued over the next year without raising questions about Gov. Chris Christie’s “New Jersey Comeback” and the ongoing debate between Christie and Democratic legislative leaders over whether the state can afford an immediate income tax cut. Christie’s Treasury spokesman, Andrew Pratt, immediately asserted that the state’s problems were “decades in the making” and contended that Christie’s policies had “pulled New Jersey back from the fiscal cliff.”
Indeed, study co-chairs Paul Volcker, former chairman of the Federal Reserve, and Richard Ravitch, a former New York lieutenant governor, praised the pension bill pushed through by Christie and Senate President Stephen Sweeney (D-Gloucester) last year as a positive step, as did former Office of Management and Budget chief Richard Keevey, who also served on the task force.
But Volcker and Ravitch predicted that New Jersey and the other state governments studied will be running into severe fiscal shoals in the years ahead, and Keevey specifically warned in a WHYY interview that New Jersey’s fiscal problems are so deep that “we’re on a track that the revenues will not match with the expenditures in the long run.”
Indeed, of the six large states included in the State Budget Crisis Task Force Study -- New Jersey, New York, California, Illinois, Virginia, and Texas -- New Jersey arguably faces the toughest overall road:
Even with the new pension law, New Jersey’s combined unfunded pension liability and outstanding state debt equals $8,801 per person, second only to Illinois’ $9,770, and more than double the national average of $4,290.
New Jersey state revenue in Fiscal Year 2011 -- the last year for which revenue figures are available -- was 15 percent below its FY2008 pre-recession high, more than twice the national average of 7.0 percent, worse than the other five large states in the study, and sharply below New York State, whose revenue was down just 0.2 percent.
As of May, the total number of jobs in New Jersey was still 170,400 below the number of state residents working when the Great Recession hit in December 2007 -- better on a percentage-loss basis than California and Illinois, but in sharp contrast to New York State, which has not only regained all of the jobs lost, but added 33,100 new jobs in the same period.
Fifty-five percent of New Jersey’s highways were in poor or mediocre condition -- more than twice as high as in neighboring New York, 3.5 times the national average of 16 percent, and worst among the six states studied.
Thirty five percent of New Jersey’s bridges were structurally deficient or functionally obsolete, ranking second to New York State’s 37 percent and 2.5 times the national average of 14 percent.
Keevey warned that New Jersey revenue growth in the years ahead would not be sufficient to simultaneously fund the rise in pension contributions required by the new pension law; the cost of needed repairs to highways, bridges, and other infrastructure; the increasing cost of Medicaid nursing home care for an aging population; school aid, debt service, and other growing costs.
In that regard, the State Budget Crisis Task Force report echoed the 2011 and 2012 “Facing Our Future” reports written by Keevey and a bipartisan panel of former high-ranking state officials under the aegis of the non-profit Council of New Jersey Grantmakers.
What made the State Budget Crisis Task Force study different was that it benchmarked New Jersey against five other states that together make up more than 35 percent of the nation’s population, and it showed that, in comparison, New Jersey’s long-term problems tend to be deeper and that its overall recovery from the job and revenue losses of the Great Recession of 2007-2009 has been slower.
New Jersey and Illinois were on an equally poor pension footing before the state’s new pension law froze cost-of-living adjustments for retirees, required current employees to contribute more toward their pensions, and forced the state to phase in pension contributions over a seven-year period that will bring the state to full funding -- and the pension system’s funded ratio to 80 percent -- by Fiscal Year 2018.
However, as the study showed, New Jersey’s state tax-supported debt amounts to $3,964 per person -- $756 more per person than New York, which had the second-highest debt of the six states studied, and almost seven times as much as Texas, whose state debt per taxpayer is just $588 per person. Further, New Jersey’s debt will keep rising because most of the state’s $1.6 billion-a-year Transportation Trust Fund is being borrowed over the next four years, and a new higher education bond issue is on the ballot this fall.