NEW JERSEY COPS ■ MAY 2014
5
Government Affairs
State Budget hole threatens pension payment
The recent announcement that the current New
Jersey State budget is
underfunded by $807 million has left legislators in
Trenton questioning the governor about where
they can find nearly a billion in cuts and revenue
the
Rob Nixon to make updoesdifference. And considering that
this deficit
not take into account the budget for next fiscal year, uncertainty over the health
of the NJ State Budget has become a major concern at the State House. One potentially large obligation that
could face the chopping block is the state’s growing pension contribution for Fiscal Years 2014 and 2015. And further deferrals of
pension payments raises once again the specter of potential cuts
in a future round of pension reforms.
State House
Report
How the state ended up with such a large hole in what was
supposed to be a balanced budget depends on which side of the
table you sit on. The Christie Administration argues that recent
federal tax code changes allowed high earners to shift their
income to avoid a major tax hike this year. The State Legislature
will argue that the original Fiscal Year 2014 Budget was built on
a house of cards that grossly overestimated revenues and tax collections to begin with. At the end of the day, the state constitution requires that the State Budget be balanced by June 30 of
each year. That means one thing is certain: Since there isn’t a billion dollars hiding under the cushions in a couch in the State
Treasurer’s office, a fairly dramatic cut or deferral in state spending is going to be debated shortly.
The unbalanced budget has led the credit rating agencies to
lower the state’s bond rating, which essentially makes it more
expensive for New Jersey to borrow money for major projects. In
the government world, that is like questioning the credibility of
the state’s bookkeeping abilities. Simply put, if Wall Street can’t
rely on the state to have money to pay the current bills, then why
risk low-interest loans to the state for future expenses?
But one thing looms over both ѡ