AP News

Report: Retiree, health costs draining NJ budget


TRENTON, N.J. (AP) — New Jersey faces a series of increasingly urgent budget pressures, including keeping pension and health insurance promises to retirees, funding health care for the poor and repairing aging roads and bridges, said three independent experts who published a report examining the state's financial condition Thursday.

The trio, led by former Federal Reserve Chairman Paul Volcker, are taking an unvarnished look at the budgetary strains facing six states: New Jersey, New York, Virginia, Illinois, Texas and California. Their group, called the State budget Crisis Task Force, was in Trenton to discuss their findings as reports on New Jersey and Virginia were being released.

Former New York Lt. Gov. Richard Ravitch and Richard Keevey, from the School of Public Affairs and Administration at Rutgers-Newark, also contributed to the report.

The report describes spiraling retiree and health care costs draining all state budgets. In New Jersey alone, unfunded liabilities to retirees are nearly $85 billion despite sweeping benefits changes enacted last year. New Jersey also needs a way to fund its unmet infrastructure needs, which the report estimates to be at least $133 billion for transportation, wastewater treatment and drinking water during the next decade.

"It became very clear to many of us that for a lot of reasons most states were on the verge of being on unsustainable paths for true fiscal balance. The reasons for this, which are almost uniformly true, are that the cost of pensions and other retiree payments and the costs of health care and Medicaid in particular are rising at rates far greater than the rates at which taxes are being collected," Ravitch said.

New Jersey's reliance on income and sales taxes to fund nearly two-thirds of the state budget also is problematic because collection amounts fluctuate depending on the economy. Untaxed goods and services and untaxed Internet purchases are further eroding the sales tax base, the task force found.

The task force cautioned against using gimmicks to balance the state budget, as governors of both political parties have done in the past, such as raiding funds dedicated to a specific area, such as transportation, and instead using it to fund general operations or borrowing to run day-to-day government.

The task force didn't offer specific budget or policy recommendations. But when asked directly whether the state would need to raise taxes to meet its revenue challenges, Ravitch said, "my guess is ultimately there will have to be more revenue to meet the basic obligations the state has committed to."

More broadly, the experts suggested that state leaders adopt multi-year budget forecasting and replenish the rainy day fund that's been depleted by the most recent recession.

The full report can be viewed online at www.statebudgetcrisis.org.


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