In a detailed report, the Garden State Initiative (GSI), a prominent think tank in New Jersey, has highlighted the state's pressing economic and fiscal challenges. The report, titled "New Jersey’s Fiscal Cliff Explained," not only outlines these issues but also offers a series of recommendations aimed at restoring economic stability.
GSI President Regina Egea emphasized the importance of the report by stating, “Our report not only identifies the very serious economic issues facing the state, but also provides a blueprint for how to address them in a pragmatic and specific way.” She noted that other states have successfully implemented policy changes that could guide New Jersey towards financial recovery.
The project was conducted in collaboration with Professor Thad Calabrese from New York University. He commented on recent developments in New Jersey's fiscal management: “New Jersey has done some positive things in recent years, like making full and on-time pension payments, but the growth in state spending – which increased nearly 30% over the past decade while population has stagnated and even declined – has the state at a tipping point.”
Calabrese pointed out that despite receiving $8.5 billion in federal aid during the pandemic, policymakers missed opportunities for long-term investments that could have driven economic growth. He criticized what he described as an "artificial prop" of surplus funds misleading public perception about financial health.
Egea contrasted New Jersey's situation with states like Pennsylvania and North Carolina, noting their efforts to create more business-friendly environments. She remarked on rising taxes: “New Jersey’s Corporation Business Tax as well as major taxes on their employees have grown exponentially, making it more expensive to operate and undoubtedly discourages the creation of new jobs.”
Audrey Lane, GSI's Policy Director, discussed tax reliance: “For residents, our state’s gross overreliance on families making $250,000 or more...has become untenable.” She highlighted that such households now contribute two-thirds of total gross income tax revenue compared to half in 2011.
The report projects that New Jersey will need an additional $5 billion in revenue over two to three years to maintain current spending levels. This could mean significant tax increases across various sectors.
Despite painting a grim picture of current finances, GSI proposes several policy solutions:
- Funding recurring expenditures with recurring revenues.
- Moderating tax rates.
- Reforming pension and retiree health insurance systems.
- Reducing costs associated with energy and infrastructure.
- Focusing spending on essential public services.
- Ending reliance on one-time revenues for budget stability.
Professor Calabrese concluded by warning against complacency: “We have arrived at the fiscal cliff, but we haven’t gone over the edge yet.” He urged immediate action from policymakers to align New Jersey with states experiencing growth and reducing debt burdens.
