Saturday, August 30, 2014
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Analysis: New Jersey Faces Four-Year Fiscal Crisis

New Jersey is facing a four-year budget crisis, with the cost of pensions, retiree health care benefits and debt service projected to rise at least $4.6 billion over Gov. Chris Christie's last four budgets, a NJ Spotlight analysis shows. The four-year jump would be equal to 14 percent of the current $32.6 billion budget, and would represent a significant challenge for any governor or Legislature.

Analysis: New Jersey Faces Four-Year Fiscal Crisis

Gov. Chris Christie´s proposed 2015 budget is likely to be enacted with few changes. (MICHAEL BRYANT / Staff Photographer/File)
Gov. Chris Christie's proposed 2015 budget is likely to be enacted with few changes. (MICHAEL BRYANT / Staff Photographer/File)

New Jersey is facing a four-year budget crisis, with the cost of pensions, retiree health care benefits and debt service projected to rise at least $4.6 billion over Gov. Chris Christie’s last four budgets, a NJ Spotlight analysis shows. The four-year jump would be equal to 14 percent of the current $32.6 billion budget, and would represent a significant challenge for any governor or Legislature.

But New Jersey’s fiscal crisis is deepened by four years of overborrowing that has bankrupted the Transportation Trust Fund a year early, a reliance on fiscal gimmicks and a cannibalization of the state surplus that led to Standard & Poor’s credit downgrade, and a governor so eager to cut taxes that he jumped at the idea of eliminating the $325 million realty transfer tax at the same time that he is proclaiming that New Jersey is like Detroit headed down the road to bankruptcy.

Furthermore, while New Jersey could conceivably cover its soaring pension, retiree health benefit and debt-service costs over the next four budgets, that depends on Wall Street’s bull market continuing at least another three years to keep tax revenue flowing in from the wealthy 1 percent who pay 40 percent of the state’s income tax. It was a “recession of the rich,” not the increase in middle-class unemployment, that sent state revenues plummeting from 2008 to 2010.

Despite the deepening state fiscal crisis, the Fiscal Year 2015 budget that Christie proposed two months ago is likely to be enacted with few changes. For the third year in a row, Christie Treasurer Andrew Sidamon-Eristoff’s revenue projections are higher than those of the nonpartisan Office of Legislative Services’ budget director, David Rosen.

But unless an “April surprise” shows lower income tax collections for the biggest month of the year when the figures are released in mid-May, Christie and Sidamon-Eristoff will simply use their executive branch power to certify their $34.4 billion revenue forecast for next year’s budget. And even if Democrats did reintroduce a millionaire’s tax to fund new initiatives, as progressive coalitions have suggested, Democrats lack the two-thirds majority needed to override a Christie veto.

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NJ Spotlight is an issue-driven news website that provides critical insight to New Jersey’s communities and businesses. We are non-partisan, independent, policy-centered and community-minded, and we're partnering with Philly.com.

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