By Joshua A. Sotomayor-Einstein | The Save Jersey Blog
I recently had the pleasure of interviewing Joe Luppino-Esposito, Save Jerseyans, the editor and general counsel for State Budget Solutions (statebudgetsolutions.org). State Budget Solutions (SBS) is a think tank that focuses on budgetary challenges facing statehouses and city halls nationwide. From Medicaid expansion and underfunded pensions to education funding and budget “gimmicks” and more, SBS looks at state and local policies to identify where there is wasteful spending of taxpayer dollars.
With Governor Christie’s state budget ready to drop this afternoon, here are some important things to keep in mind:
- How reliant is New Jersey on the federal government?
“New Jersey is better than most states in this area. Just over one quarter of the state’s general revenue comes from the federal government. New Jersey isn’t as good as North Dakota, which relies on the federal government for only 19% of its general revenue, but the Garden State is far better off than worst-ranked Mississippi, at 42.9%.”
- What strings are attached to federal funding?
“This will depend on the program. But in most cases, federal funding does not allow the state to innovate. States must meet maintenance of effort requirements and often must file an inordinate amount of paperwork, increasing administrative costs.”
- Using a fair-market valuation, SBS ranks New Jersey as the 6th-most underfunded pension system in the country, and the 5th-worst per capita. Just how bad is New Jersey’s pension crisis? How does one determine a fair market valuation?
“The pension crisis is reaching frightening proportions. New Jersey needs to start putting the full contribution into the plan each year and instituting even more reforms to ensure that the money will be there in the future. We calculate the fair market valuation by taking a stand-in for the 15-year Treasury bond yield averaged over calendar year 2013.”
- Many have accused the state government of using budgetary tricks to hide the severity of our debt. Is this true and if so, how does it understate our fiscal problems?
“The biggest trick is that the state does not make the full annual required contribution into the pension fund. This helps to keep more money in the general budget, and therefore does not show a shortfall in the regular budget. By skipping the payment, the state ignores pension debt and never needs to reduce services.”
- What have other states with healthier fiscal situations done to get on the right track? What would you suggest New Jersey do?
“Especially when it comes to pensions, New Jersey should look to Wisconsin for what to do about current employees, and look at Oklahoma and a number of other states when thinking about future employees. Wisconsin has lower discount rates and also increased employee contributions.”