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Survey Faults NJ, Other States for Lack of Long-Term Budget Planning

Budgetary best practices, according to think tank, mean making multiyear projections for both anticipated tax revenues and spending

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New Jersey is one of more than two dozen states that aren’t following best practices for long-term budget planning, according to a new survey of the policies currently in place across the country.

The assessment, conducted by the Center on Budget and Policy Priorities, a liberal think tank based in Washington, D.C., looked at how many states prepare multiyear projections for both anticipated tax revenues and spending.

Just three states, New York, Alaska, and Washington, are doing both, according to the survey results, which were included in a report released yesterday titled “Better State Budget Planning Can Help Build Healthier Economies.”

Another 22 states are forecasting either long-term revenues or expenditures.

New Jersey is among a group of 26 states that aren’t following either practice, preparing just one-year projections, the group found.

“New Jersey falls far short on budget planning,” said Liz McNichol, a senior fellow at the Center on Budget and Policy Priorities and author of the report. “Reforming the state’s budgeting process would increase the state’s ability to plan for the future, boosting the chances they will have the resources to invest in schools and other building blocks of strong economic growth and widespread prosperity.”

The report makes the case for multiyear forecasting of both anticipated revenues and expenditures, saying it can help states better plan for the future and increase the likelihood that they will have the resources to invest in schools and other areas that provide a strong foundation for state economies.

“Better planning also can reduce uncertainty about future funding levels and tax rates, improving a state’s business climate,” the report said.

New Jersey’s budgeting practices have drawn increased scrutiny in recent years as the state has been struggling to recover from the past recession. State tax collections took a huge hit during the economic downturn, and Gov. Chris Christie’s administration at times has been forced to delay property-tax relief, reduce contributions to the public-employee pension system, and borrow more to pay for transportation projects to keep spending in line with revenues, something that is required by the state constitution.

A bill was introduced by lawmakers here earlier this year to update state-budgeting policies in a number of ways, including requiring revenue projections that go three years out has yet to reach the finish line.

The measure also calls for estimating the spending requirements needed to maintain baseline services for three years as well.

And it would also establish consensus revenue forecasting between the governor’s office and the Legislature, another practice encouraged by the Center on Budget and Policy Priorities that right now is being followed by 28 states, according to the groups’ report.

So far, the bill has passed the full Assembly, and a committee in the Senate made amendments before also adopting the measure. But it has yet to advance any further.

Sponsors of the bill renewed calls for support from their colleagues for the budget-forecasting changes after the group released its report yesterday.

“A change in the budget process is way overdue in New Jersey,” said Assembly Speaker Vincent Prieto (D-Hudson), a former chair of the Assembly Budget Committee.

“Continuing to go about things in the same manner as in the past would be a disservice to all residents,” Prieto said.

“As lawmakers, we need the right tools to properly assess the budget and plan for both bad times and good times,” said Sen. Peter Barnes (D-Middlesex), a member of the Senate Budget and Appropriations Committee.

Right now, the state constitution gives the executive branch in New Jersey the sole authority to certify revenues for the annual state budget. The state Department of Treasury compiles a fiscal outlook and revenue forecast, with the state treasurer appearing before lawmakers twice each spring to review the forecast and make changes, if necessary, based on tax-collection trends. But the forecasting of revenues and expenditures is primarily done on an annual basis only in New Jersey.

Forecasts are also prepared by the budget analyst for the Office of Legislative Services, the state Legislature’s nonpartisan research arm, but those projections are only advisory and typically cover just one year as well.

Though the last state fiscal year ended on June 30 with an unexpected $200 million tax-collection windfall, in prior years the state has had to confront several revenue shortfalls, such as a roughly $1 billion gap that opened up at the end of the 2014 fiscal year.

To keep the budget balanced last year, Christie, a Republican, reduced funding for the public-employee pension system, something credit-rating agencies made note of in a series of downgrades issued in response to the shortfall. It’s unclear right now why the bill to improve state budgeting practices has not yet come up for a vote before the full Senate.

Sen. Robert Gordon (D-Bergen), a primary sponsor of the bill, said he's expecting it will advance in the Senate this fall.

“I certainly would like to move the bill and I have not heard any resistance to it,” Gordon said. “This is a good-government bill.”

Once the bill receives Senate approval, it would have to be voted on again in the Assembly before going on to Christie for consideration due to the amendments made in the Senate committee.

Sheila Reynertson, a senior policy analyst at New Jersey Policy Perspective, a liberal think tank based in Trenton, said passage of the bill would be “an important step in the right direction” and she urged the Senate to take action.

A spokesman for the state Department of Treasury declined comment on the report yesterday and he cited department policy of not commenting on pending legislation when asked about the bill.

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