As matters currently stand, each resident of New Jersey is on the hook for $18,116 to cover its debt and pension liabilities. For a family of four, make that $72,464.
That’s far and away the largest per person debt and pension liability in the nation. The people of Pennsylvania and New York, for example, are liable for less than $3,000 each, according to Merritt Research Services figures.
New Jersey’s debt and obligations for worker pension and health coverage are more than its residents can handle. State government doesn’t even pay enough on that debt and those employee benefits promises to keep its $200 billion liability from growing, yet such spending is already crowding out that on crucial public services such as transportation and education.
Now state leaders are negotiating the state’s next fiscal year budget that begins in July. Gov. Phil Murphy primarily would raise taxes and rely on one-time fixes to put off addressing New Jersey’s looming financial crisis. Senate President Steve Sweeney would reduce spending by starting to implement reforms recommended by his bipartisan task force on restoring fiscal responsibility. Residents and businesses should hope Sweeney’s leadership prevails.
Last year, the Legislature gave Murphy a tax increase on businesses making at least $1 million a year and residents earning more than $5 million. Now he’s again seeking higher taxes on individuals making $1 million. But last year’s tax increases did nothing to improve New Jersey’s finances, so more of the same can’t be the answer.
Murphy also got caught last week raiding the New Jersey Firemen’s Association fund for $33 million for his proposed budget. The association provides assistance to firefighters for retirement homes, burial benefits and in-home medical care. The governor reversed course in the face of a backlash from state fire officials and lawmakers.
Such shameless budget raids and gimmicks are inevitable and will increase unless state government spends less and reduces its debt and liabilities.
Sweeney last month told a town hall at Stockton University’s Atlantic City campus how the state can start to avoid its impending financial “death spiral.”
He would start with a modest proposal in the task force’s Path to Progress report — his recently introduced legislation to merge the School Employees Health Benefits Plan with the State Health Benefits Plan, saving districts and their employees millions of dollars.
Later, school districts would be merged so that each school is in a K-12 district, which could cut the number of districts in half, ensure consistent curriculums and reduce costs.
Pensions would be significantly reformed for public workers with fewer than five years on the job. They would receive a standard pension for the first $40,000 of their earnings and a 401(k)-style account with a guaranteed return for income above that.
Sweeney also said he would mandate that the savings by towns from pension reform be used for property tax relief.
New Jersey’s financial problems demand solutions, and these are reasonable given the hole the state is in. Credit-rating agency S&P Global says the state has the second worst pension funding ratio in the nation and is dead last in making progress toward funding even the bare minimum of its growing pension costs.
Gov. Murphy’s approach would dodge the fiscal bullet and increase spending further beyond what’s sustainable. That’s just digging the hole deeper.
Sweeney and the Economic and Fiscal Policy Workgroup want state government to face reality and start regaining the strength to serve the interests of the public. Sooner or later that must happen, and since later is just more painful, starting with the new budget is in everyone’s interest.