The maneuver enabled Christie to tout his administration’s fiscal responsibility, yet the state’s pension system hasn’t fared nearly as well. It now has the second-worst funded ratio in the country, trailing only Kentucky, according to a 2019 report from the Pew Charitable Trusts.
New Jersey is now predicting a shortfall of over $10 billion through fiscal year 2021, according to state Treasurer Elizabeth Muoio, after Governor Phil Murphy disclosed that April revenue plunged 60% due to the effects of the Covid-19 lockdowns.
Word Games
Sometimes “balanced” doesn’t mean what you might think it does. A state budget can be balanced while simultaneously running a “structural deficit” — that is, when recurring revenue isn’t enough to pay persistent expenditures.
In the wake of the Great Recession, deep spending cuts by many states weren’t enough to offset a slower-than-anticipated economic recovery. A 2018 Pew Trusts report cited 10 states that had “chronic shortfalls” that threatened to create an “unsustainable fiscal situation.”
Illinois, for example, ran a budget deficit of 6% from 2004 through 2018, according to Pew Trusts, despite having a balanced-budget amendment. In explaining the shortfall, a report from Illinois Policy, a conservative think tank, blamed the state constitution’s use of the word “estimated.” A balanced budget in Illinois is one that “shall not exceed funds estimated by the General Assembly during that year.” That, in effect, has allowed lawmakers to persistently pass budgets with overly optimistic revenue expectations.
This article was provided by Bloomberg News.