Truth on NJ Financial State 2020

Truth in Accounting (TIA) today released its eleventh annual Financial State of the States with New Jersey still at the bottom:

New Jersey’s elected officials have made repeated financial decisions that left the state with a debt burden of $189.6 billion. That burden equates to $57,900 for every state taxpayer. New Jersey’s financial problems stem mostly from unfunded retirement obligations that have accumulated over the years. Of the $225.6 billion in retirement benefits promised, the state did not fund $95.7 billion in pension and $76.8 billion in retiree health care benefits.

New Jersey did not have enough money set aside to weather the current pandemic and fluctuations in the market. According to rough estimates by Truth in Accounting, New Jersey is projected to lose $14 billion in revenue as a result of this crisis. The uncertainty surrounding this crisis makes it impossible to determine how much will be needed to maintain government services and benefits, but New Jersey’s overall
debt will most likely increase.

It was primarily the Cheiron gimmicks that brought that liability number down from last year:

Borrowing To Fund Pensions

Richard Keevey in njspotlight is against it, arguing:

Do not issue bonds to balance the New Jersey state budget. It is bad public policy and it will create much deeper budget problems in the future. And, it is not necessary.

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The state sold bonds to fund the pension system almost 24 years ago. We are still paying debt service on these bonds. In the budget for fiscal year 2020, the debt service payment is $472 million for those bonds and we have four more years to go at $507 million per year. Such actions were wrong then and they are wrong now.

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Defer $2 billion of the $4.9 billion proposed to be paid into the pension systems. This option would have little or no adverse short-term budget implication and it can be corrected in future years when the state’s economy recovers.

Two problems with that strategy:

Filling (and Ranking) State Holes

If the Democrats sweep, states and their pension holders will be bailed out, either through direct financial support from the federal government or at the expense of bondholders, or both (“The Trillion Dollar Hole,” Cover Story, Aug. 28). If the Republicans retain the Senate, there will be little if any bailout money going to the states and various municipalities, but instead an emphasis on providing financial support to large-scale employers to get people back to work to make them self-sustaining.

If presidential election coverage ever moves beyond teleprompter gaffes and distaste for dead soldiers maybe we can get to a financial issue of importance to every American that divides Biden and Trump as delineated in the perspicacious comment above on barrons.com in response to an article on trouble brewing in the municipal bond market.

The Deficit Myth; You’re Entitled! Chapter

This book could serve as part of an intellectual foundation justifying the looming Biden bailouts of state governments but my primary focus (and supposedly that of 54% of the population) is Chapter 6 which provides a solution to avoid legally required benefit cuts in 2035: change the law and print as much money as you need.

Another foundation referenced (pages 181-2) is this 2005 Alan Greenspan testimony:
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More excerpts:

NJSC Falls In Line

The opinion is out and I was wrong. I thought there would be one member of the New Jersey Supreme Court who would vote against unlimited state borrowing without voter approval. There wasn’t.

NJSC Borrowing Announcement Coming

As reported by newjerseyglobe:

The New Jersey Supreme Court will release their opinion in a challenge to Gov. Phil Murphy’s $10 billion borrowing plan mounted by Republicans at noon tomorrow, a spokesperson for the top court says.

The only bit of suspense for me:

What are you going to do- lay off public workers?

When that question was asked by a public worker of a critic of New Jersey Governor Murphy’s borrowing plan the pension payment came up.
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It also came up last week when the state’s lawyer confirmed that the borrowed money could be used for anything even a billion dollar sports arena (or maybe a pension payment or another beach house for the governor?).

After NJSC Debt Rubber Stamp

Marc Pfeiffer, senior policy fellow at the Bloustein School of Planning and Public Policy, working under the perfectly reasonable assumption that the New Jersey Supreme Court won’t take constitutional limitations on borrowing for general expenses that seriously conjectured as to consequences.

NJ Court on Unlimited State Borrowing

Per New Jersey Playbook:

Republicans are squaring off with Democrats in the state Supreme Court today. The debate will surround the new law allowing the state to borrow up to $9.9 billion.

Gov. Phil Murphy signed the controversial law earlier this month to make up for plunging revenues during the pandemic. After the law was signed, several Republicans immediately filed a lawsuit challenging its constitutionality.

Whatever the court decides will have a huge impact on the state’s finances. Republicans fear that the law will saddle future generations with piles of debt. Democrats say that without the ability to borrow, they won’t be able to fund critical government services.

Arguments are scheduled to be held online starting at 10am with the webcast available here. My prediction:

Local Coronavirus Borrowing

The New Jersey legislature passed A3971 which would allow local governments to acquire bonds for up to 30 percent of their budget, backed by local property tax revenue and payable over a decade.The state already can borrow without taxpayer approval but when it comes to localities, Governor Murphy sees issues.