A trusted and reliable revenue estimate is central to any fiscally responsible budget. Yet, in New Jersey, the legislative and executive branches calculate revenue for the upcoming fiscal year on separate tracks. These competing projections often cause gridlock and invite unnecessary politics into the budget-making process.
Fortunately, there are concrete ways to ensure a more realistic and transparent budget debate, starting with a “consensus” process for developing a reliable, nonpartisan estimate of how much money the state has to work with. A proposal in the Legislature would do just this — institute consensus revenue forecasting, a well-established budgeting practice utilized by 28 other states.
The proposal would establish a “Revenue Advisory Board” comprised of a representative of the executive branch, the Office of Legislative Services, and a mutually agreed-upon, qualified member of the public. The board would work collaboratively to calculate the amount of revenue the state can expect to collect in the upcoming fiscal year based on analyses of current economic conditions and outlooks. While this legislation would not change the Governor’s authority to certify revenues, it would create a public revenue projection process that actively encourages more collaboration and transparency.
However, the bill could be stronger in two ways. For one, forecasting by the year leaves policymakers unable to anticipate and respond to predictable changes beyond one fiscal cycle, making the state vulnerable to revenue shortfalls and subsequent cuts to programs and services that families rely on. A better approach would be three-year revenue estimates because they provide policymakers with more clarity for long-term planning.
Second, the bill lacks similar long-term estimates on the spending side, which is another budgeting best practice. Being aware of potential cost increases before they happen gives policymakers a firewall against year-end budget changes. By simply projecting out the next three years of some foundational spending areas, policymakers would have a better understanding of how much revenue the state needs just to keep these existing programs stable. This would give New Jersey a stronger grasp of the real costs of meeting its obligations, like the state’s contribution to the pension system, and programs like K-12 education, municipal aid, and property tax relief.
New Jersey should follow the lead of the 28 states and set a trustworthy benchmark for how much to invest in schools, mass transit, and other public services. This best practice, valued by credit rating agencies, would also give New Jersey a welcome opportunity to further retreat from its losing streak of credit downgrades.
While a more comprehensive bill would better improve the budget-making process in New Jersey, this bill is a step in the right direction. Otherwise, lawmakers remain blind to the impact of their budgeting decisions, putting the Garden State’s economic future at risk.