MONEY ISSUES: the Garden State is rated dead last in a new study released by the Mercatus Center at George Mason University in Fairfax, Va.
By Mark Lagerkvist | New Jersey Watchdog
Is New Jersey fiscally sound? Or does the state government rank as the absolute worst in the nation?
It depends who you trust and believe.
“The state of the state is good, and getting better,” Gov. Chris Christie proclaimed Tuesday in his State of the State address. “Four years ago, we were in the throes of economic crisis … By every measure, business confidence in New Jersey is up.”
In contrast, the Garden State is rated dead last in a new study released by the Mercatus Center at George Mason University in Fairfax, Va. According to the study, New Jersey:
- Ranks 50th in budget solvency, the state’s ability to cover its expenses in a fiscal year;
- Places 50th in long-run solvency, its capability of making ends meet when long-term commitments, such as pension obligations, are calculated; and
- Rates 50th in overall fiscal condition, which also includes short-term cash solvency (No. 36) and service-level solvency (No. 39), the state’s resources to provide adequate services to its residents.
In his speech, Christie boasted that New Jersey has balanced its budget during each of the past four years. But study author Sarah Arnett attributed that fact to smoke-and-mirrors accounting tricks.
“New Jersey and Illinois face similar problems of tax revenues that have not kept up with expenditures, use of budget practices that only appeared to balance their annual budgets and significant debt levels as a result of decades of using bonds without being able to pay for them,” Arnett wrote in the study.
The elephant in the Statehouse is the staggering pension debt.
“New Jersey faces long-run solvency problems due in part to nearly 15 years of underfunding its state and local pensions,” Arnett said.
The shortfall is $47 billion, according to the state’s most recent estimate. For purposes of her calculations, Arnett conservatively pegged it at $25 billion. She noted that another study puts the deficit at $173 billion.
All estimates are essentially SWAGs – “scientific wild-ass guesses.” They are based on various assumptions, decades of predictions and actuarial acrobatics.
Though the figures are mind-numbing, the long-term consequences are quite real. So real that during his address, Christie suggested the possibility that New Jersey could back away from its pension promises.
“We need to have the conversation now about further changes to our pension system and to adding further to the state’s debt load,” the governor said, stripping off the sugar coating that covered the start of his speech.
“If we do not choose to reduce our soaring pension and debt service costs, we will miss the opportunity to improve the lives of every New Jersey citizen, not just a select few,” he warned.
The bottom five states in fiscal ranking are New Jersey, Connecticut, Illinois, Massachusetts and California, according to the Mercatus study.
The five top-rated states are Alaska, South Dakota, North Dakota, Nebraska and Wyoming.
Contact Mark Lagerkvist at firstname.lastname@example.org.
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