New Jersey Third-Worst State on Long-Term Budget Planning

Contact: Jon Whiten, NJPP, 609-393-1145 ext. 15 or

New Jersey Third-Worst State on Long-Term Budget Planning
Better Planning Brings Many Benefits

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New Jersey is the third-worst state in the country when it comes to long-term budget planning, according to a major new report from the Washington, DC-based Center on Budget and Policy Priorities.

New Jersey should improve by adopting a set of proven budget-planning tools that that could help it weather difficult economic times, build an attractive business climate and make government more effective and efficient, the report finds.

“These are common-sense solutions that can make a real difference in elevating the level of budget-making in New Jersey,” said Gordon MacInnes, president of New Jersey Policy Perspective. “These tools are not ideological: People across the political spectrum can agree that providing more and better information to our lawmakers when they’re crafting spending plans is in New Jersey’s best interest.”

The report ranks the states according to whether and how well they make use of ten key fiscal planning tools, which fall into three broad categories:

• A map for the future: the budget and accompanying documents should include a detailed roadmap of the budget’s immediate and future impacts on the state’s fiscal health.

• Professional and credible estimates: standards and sufficient oversight are needed to guarantee that these analyses of the budget’s impacts are professional, credible, and prepared without political influence.

• Ways to stay on course: mechanisms should be in place to trigger any needed changes during the budget year, before too much damage is done.

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New Jersey scored just 3.5 points out of 10 possible; only Oklahoma and South Dakota performed more poorly. The state could improve its planning by adopting a number of policies, including:

• Providing greater oversight of tax expenditures. While New Jersey does now create a tax expenditure report each year, it could be greatly expanded. A tax expenditure report quantifies the amount of revenue the state loses to hundreds of tax exemptions, credits and exclusions – everything from corporate subsidies like the Grow New Jersey program to exclusions on corporate dividends to sales tax exemptions on a wide array of items. However, New Jersey’s report is woefully incomplete: it includes far less than half of the state’s tax expenditures. The state should work to fully account for revenue loss from all, not just some, of these tax preferences, so policymakers can make more informed decisions about whether or not to continue certain breaks.

• Mandating automatic expirations of tax expenditures. Every year the Governor’s Office, the Legislature, the Office of Legislative Services and interested parties throughout New Jersey pore over the state’s proposed spending plan with a fine-toothed comb. By contrast, most tax credits and subsidies, once enacted, remain on the books indefinitely without being subject to a standing review process. An automatic expiration date, or “sunset,” on all new tax expenditures will help ensure that the state’s money is being allocated wisely by forcing the Legislature to periodically revisit all credits, exemptions and subsidies on a case-by-case basis.

• Creating current service baselines. New Jersey should regularly project how much it will cost in an upcoming budget period to deliver the same quantity and quality of services to residents that it is delivering in the current budget period, taking into account factors such as inflation, expected changes in the number of people utilizing those services, any previously enacted rule changes that have not yet phased in and ongoing formula-based adjustments.

• Producing multi-year revenue and spending forecasts. New Jersey should project revenues and current services spending for at least three years in order to help chart a clear and sustainable fiscal course. These projections should be a regular part of the budget and should be detailed and easily accessible.

• Providing greater oversight of pension funding. There should be regular reviews by independent authorities of the methods New Jersey uses to determine future pension funding. These reviews should be published and easily accessible to the public.

By adopting these and other tools, lawmakers can reduce public uncertainty about what services they will receive and what taxes they will owe, making our state more attractive to businesses. They can also help New Jersey avoid making short-sighted decisions that do long-term damage to the state’s budget and economy. And, better planning can ensure that government delivers important services like health care and education in a way that’s effective and efficient in both short and long run.

“Better planning encourages policymakers to take the long view, one that considers a state’s future workforce, population, and infrastructure needs,” said Elizabeth McNichol, senior fellow at the Center on Budget and Policy Priorities and co-author of the report. “A state’s budget decisions today on services like education and infrastructure affect both the state and the nation for years to come.”

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