(The Center Square) – Even before the COVID-19 pandemic, New Jersey was “on an unsustainable trajectory” fiscally, but the past year-and-a-half has only exacerbated the state’s predicament.
The finding is part of a new research report, Toward a Fiscally Sustainable New Jersey: Analysis and Recommendations, from the Garden State Initiative (GSI).
The analysis also found that the Garden State has not made progress in addressing its long-term fiscal crisis, which the 2012 State Budget Crisis Task Force report highlighted nearly a decade ago.
“In the last decade, the fiscal challenges faced by our state have not been addressed in any meaningful fashion, in fact, we’ve backslid in several measurable ways,” Thomas J. Healey, the founder and managing partner of Healey Development, said in an announcement.
The state is awash in cash — at least on paper. New Jersey received more than $6 billion in American Rescue Plan (ARP) dollars, and state lawmakers authorized borrowing an additional $4 billion.
While the influx led state officials to boast the “record surplus” for the state, New Jersey has more than $40 million in debt, and some state leaders have called on the state to use its “surplus” to pay down its debt. Earlier this year, S&P Global Ratings cited the state’s high debt burden among several “weaknesses” as part of an updated bond rating.
The report suggested state leaders “hold the line” on taxes considering the state’s already high tax burden. According to GSI, New Jersey taxpayers earning more than $100,000 per year account for roughly 24% of tax returns filed but pay about 86% of the state’s income taxes.
Additionally, the group called for leaders to reform the state’s public pension and healthcare systems, invest in infrastructure spending and refocus spending to deliver a structurally balanced and sustainable budget.
The state’s $46.4 billion fiscal 2022 budget sets aside $3.7 billion for a debt defeasance fund, including $2.5 billion to retire state debt, and it allocates $6.9 billion to the state pension plan.
“Despite the praise surrounding the significant $6.9 billion investment in the pension fund, the state must avoid being lulled into complacency because of one-time Federal COVID financial relief and its $4 billion in borrowing,” Thad Calabrese, an associate professor of public and nonprofit financial management at New York University’s Robert F. Wagner Graduate School of Public Service, said in an announcement.