New Jersey is on the Brink of Financial Ruin

By The Fund for New Jersey, Special for USDR

New Jersey’s next governor and Legislature must take strong, deliberate action, including spending reductions and revenue increases, to solve the state’s retiree benefits funding crisis and get the state back in shape to make investments in schools, transportation, clean air and water, and other areas crucial to widespread well-being, a report released today by The Fund for New Jersey says.

The report, “New Jersey’s Prosperity Depends on Immediate Fiscal Reforms,” is the first in a seven-part Crossroads NJseries aimed at informing public debate in this pivotal election year. It was produced by The Fund for New Jersey, which since 1970 has focused its philanthropy on improving the quality of life in the Garden State by supporting good policy decision-making. The other Crossroads NJ reports will cover climate and environment, criminal justice, education, housing and land use, jobs and the economy, and transportation.

As the Prologue to the series notes, the state has, for years, refused to make the public investments needed for New Jersey’s communities to thrive and, by those decisions, has squandered our potential. This is the time for us to confront New Jersey’s problems head on and to seek consensus on the policies that divide us.

“The aim of Crossroads NJ is to present evidence-based policy recommendations, generated and vetted by experts, that The Fund for New Jersey Trustees feel are sound and workable,” said Board Chair, retired Chief Justice Deborah T. Poritz. Consistent with The Fund’s status as a philanthropic foundation, The Fund for New Jersey does not support candidates or political parties.

The full text of the reports, as they are released, and other information about Crossroads NJ is available at  www.fundfornj.org/crossroadsnj

The fiscal policy report calls for a balanced, multi-pronged approach to address the huge gap, created by both parties over decades, in the amount of money set aside for state government retirees’ pension and health benefits and the amount those obligations will cost. The state could generate more than $5 billion a year if it were to:

  • Decrease retiree health care costs by shifting coverage to levels commensurate with leading private employers.
  • Reverse state tax cuts included in last year’s deal to replenish the Transportation Trust Fund, such as phasing out estate/inheritance taxes, reducing income tax on retirement income, and lowering the sales tax rate.
  • Adjust the state income tax to take in 10% more a year.
  • Increase the sales tax rate to 8%.

These options are a starting point for political discourse; they are unequivocally on the order of magnitude required to address a crisis of this scope and severity. If these actions are not taken, others of corresponding size and seriousness need to be.

Other steps are needed to modernize the state’s revenue system so it better reflects today’s economy, the state’s fiscal condition, and the need to mitigate built-in inequity:

  • Expand the number of services subject to sales tax.
  • Stop large, multi-state companies from avoiding New Jersey taxes by shifting profits they make here to other states.
  • Legalize and regulate recreational marijuana.
  • Work to persuade Congress to remove barriers to states requiring Internet and other “remote” sellers to collect sales tax owed by purchasers.
  • Consider exempting New Jerseyans below the federal poverty level from paying any state income tax.

Other recommendations include replenishing the state’s rainy-day fund to better address economic downturns, and do more to assess the effectiveness of tax subsidies given to businesses that move to New Jersey.

As the report notes, “The problem is immense and the consequences of inaction are alarming. Unpleasant but necessary state policy actions lie ahead; the impact will be widespread and not short in duration. Reforming New Jersey’s fiscal policies will take longer than a single gubernatorial or legislative term in office.”

SOURCE The Fund for New Jersey

All opinions expressed on USDR are those of the author and not necessarily those of US Daily Review.
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