New Jersey’s new fiscal year began with a loan.
According to the state Treasury Department, New Jersey received a $2.6 billion loan from J.P. Morgan on July 1, the first day of the new state budget.
It’s common for states to take out bridge loans like this to manage their cash flow. The problem is that this loan adds yet another item in the debt column – a debt burden that is already overwhelming state residents.
The nonprofit group Truth In Accounting estimates that New Jersey taxpayers owe 63% of average income for state expenses. It calculates Per Taxpayer Burden – remaining debt after available assets are tapped – for all 50 states. Much of this debt is retirement contributions not paid each year, as part of employee compensation.
Truth in Accounting’s detailed analysis of the 2011 financial report, for example, found the state of New Jersey had $82.7 billion in assets, but most of these assets were not available to pay state bills.
The group argued that $44.3 billion of capital assets, such as roads, buildings and land, should not be sold to pay bills. The use of $9.8 billion of the assets is restricted by law or contract. That leaves $28.6 billion of state assets available to pay $138.1 billion of bills as they come due. The $109.5 billion shortfall represents compensation and other costs incurred in prior years that should have been paid in those prior years. Instead these costs have been shifted to future taxpayers.
Similarly, this year the Christie administration is making a $681 million payment to New Jersey’s pension funds in the current 2015 budget. It will cover benefits earned by active employees, but not address the hotly debated problem of unfunded liabilities.
Pension liability has largely become a political issue in New Jersey, with blame spread thickly for many years. In 2011, Truth in Accounting discovered retirement benefits totaling $91.6 billion had been promised, but not funded. However, because of the confusing way the State does its accounting, only $24.9 billion of these liabilities were on New Jersey’s balance sheet.
In this week’s report, Truth In Accounting advocates for improved budget transparency, and for legislators to share details of state debt during the budget cycle.
“To prevent painful financial surprises, elected officials should adopt Full Accrual and Calculation Techniques in their budget processes,” said Donna Rook, president of StateDataLab.org, a project of the Institute for Truth in Accounting. “FACT-based budgeting would require each year’s budget to be calculated and reported in a way that everyone can see the impact on the government’s current and future financial position.”
“Debt could not be hidden in financial footnotes and appendices. Debt would have to be truthfully and transparently shown, on a timely basis, before budgets are passed,” she continued. “Each year citizens could clearly see whether the budget causes debt to increase or be paid up. No longer could government ‘credit card’ debt for today’s services be accumulated for future taxpayers to pay.”
The New Jersey Watchdog is a public interest journalism project dedicated to promoting open, transparent, and accountable state government by reporting on the activities of agencies, bureaucracies, and politicians in New Jersey. It is funded by the Franklin Center for Government and Public Integrity, a libertarian nonprofit organization.