The results of New Jersey’s latest big-picture fiscal checkup are in, and they reveal a state that continues to be saddled with a staggering amount debt — despite recent efforts to wind down Trenton’s time-worn borrowing habit.
For starters, New Jersey’s bonded debt grew by nearly $3.2 billion during the past fiscal year, reaching a record-high total of $46.1 billion, according the latest official debt report released by the Department of Treasury.
That sum easily outpaces the state’s annual budget of just under $35 billion, and it doesn’t include roughly $725 million in borrowing that’s occurred so far during the current fiscal year. It also helped New Jersey maintain its standing as one of the nation’s, ranking fourth highest in the categories of net tax-supported debt and per-capita debt.
Treasury’s latest accounting ofalso provides a new estimate for all of the nonbonded obligations that New Jersey taxpayers are on the hook for, a category that includes unfunded public-employee pension and retiree health-benefit liabilities. That figure rose to $155.2 billion during the 2017 fiscal year, as the state continued a trend of underfunding its full pension contribution, according to the report.
In all, the new grand total for what is owed to all bondholders, public workers and other groups soared to over $200 billion for the first time ever at the end of the 2017 fiscal year, a significant sum for a state with roughly 9 million residents. Yet the new debt figures drew little attention inside the State House after Treasury’s latest report was released on Friday during the meeting of a little-watched commission that tracks and reviews all state borrowing. Some panel members did use the report’s release to briefly rekindle a discussion about the affordability of public-employee benefits.
Public-finance experts generally agree that some level of debt is acceptable as states pay for long-term investments in things like roads and schools that are expected to last for generations. But state-government borrowing has surged on several occasions since theleaving New Jersey with one of the highest debt burdens among U.S. states.
When former Gov. Chris Christie took office in 2010, he promised to be more frugal, and the Republican initially had some success in lowering the rate of growth in the state’s annual debt. In fact, during the 2016 fiscal year, the state actually saw a slightin total bonded debt. But the latest official debt report tracked an increase of nearly 8 percent during the 2017 fiscal year, which was by far the largest rate of growth the state has seen in a decade. Treasury officials said much of the nearly $3.4 billion year-over-year increase stems from borrowing for state transportation projects that was issued under a renewed state Transportation Trust Fund.
The new report also detailed another $725 million in bonded borrowing that occurred during the current fiscal year, before Christie left office in early January. That total includes nearlyissued through the state Economic Development Authority to pay for new state office buildings in Trenton, and Juvenile Justice Commission facilities in Ewing and Winslow.
Many in New Jersey were under the impression that a constitutional amendment approved by voters in 2008 had fully restricted borrowing through state agencies like the EDA without any signoff from voters. But last year, the Christie administration issued $300 million in new debt through the EDA for a controversial renovation of the State House without getting approval from voters. A group of lawmakers sued to block the financing, but a state Superior Court judgethat since the bonds had already been sold the legal issue was moot. After Christie used the EDA once again to finance the new state office buildings and juvenile-justice facilities, a judge ruling in another legal challenge found the 2008 constitutional amendment did not apply to the EDA because its authority to issue debt predated the amendment.
Assembly Deputy Republican Leader Ron Dancer (R-Ocean) has introduced athat would put a new constitutional amendment before voters to close what’s now become known as the “EDA loophole.”
“It’s really an evasion of our constitutional obligation to ask voters before we borrow money they will have to repay,” Dancer said after introducing the measure last month. “It’s time we put a stop to it.”
Meanwhile, on the nonbonded side of New Jersey’s debt ledger, Treasury officials said the state’s continued underfunding of its obligation to the $77.5 billion pension system helped to fuel a more than $26 billion increase in the long-term assessment of what the state owes its retired workers. During the current fiscal year, Christie budgeted a $2.5 billion contribution to the pension system, which equals only about half the amount that actuaries say the state should be paying to help restore the retirement fund to good health.
Theput forward earlier this month by Gov. Phil Murphy, a Democrat, would boost the pension contribution to $3.2 billion, which would still be about $2 billion short of what actuaries say the state should be paying. If Murphy sticks with a payment ramp-up plan that was started by Christie, the state would make its full pension contribution by the 2023 fiscal year, a sum that will reach over $5 billion. Several members of the New Jersey Commission on Capital Budgeting and Planning asked about the affordability of that bigger payment during Friday’s meeting, as the latest debt report was released by Treasury, with longtime chair, Carol Molnar, wondering aloud whether it would necessitate more tax increases.
But another commission member, Sen. Sam Thompson (R-Middlesex), said the rising pension costs underscore the need to cut the cost of benefits, for both pensions and healthcare. That’s something Christie pressed for, with some initial changes made on a bipartisan basis in 2011. But he could not get any furtherfrom majority Democrats in the Legislature before leaving office.
“That’s the other way to do it, to reduce the liability,” Thompson said.
Meanwhile, lawmakers have already proposed two new state bond issues this year, one totalingfor an expansion of career-training programs at county vocational-technical high schools and community colleges. The other seeks to raise to help local governments improve stormwater-runoff systems. Both would involve the sale of general-obligation bonds, which means they would have to be approved by voters.