the staff of the Ridewood blog
Ridgewood NJ, according to the The Mercatus Center at George Mason University ,New Jersey is dead last in fiscal health based on its fiscal solvency. At the end of the year, it is a toss up to whether or not New Jersey has enough money to pay its bills. These high costs are unsustainable and we need reform to get New Jersey back on a better path.
#50 | Ranking the States by Fiscal Condition: New Jersey
Eileen Norcross , Vice President of Policy Research
Olivia Gonzalez ,Research Associate
On the basis of its fiscal solvency in five separate categories, New Jersey is ranked 50th among the US states for its fiscal health. On a short-run basis, New Jersey has between 84 percent and 211 percent of the cash needed to cover short-term obligations. Revenues cover 91 percent of expenses, and net position decreased by $678 per capita in FY 2015. On a long-run basis, New Jersey’s metrics are dire. A net asset ratio of −2.92 points to a heavy reliance on debt and large unfunded obligations. Long-term liabilities are 360 percent of total assets, or $16,821 per capita, which is the highest among the states. Total primary government debt is $44.23 billion, or 8.3 percent of state personal income, far above the average for the US states. Unfunded pension liabilities, on a guaranteed-to-be-paid basis, are $224 billion, or 42 percent of state personal income. OPEB is 15 percent of state personal income, the highest ratio in the states.
Cash solvency measures whether a state has enough cash to cover its short-term bills, which include accounts payable, vouchers, warrants, and short-term debt. (New Jersey ranks 37th.)
Budget solvency measures whether a state can cover its fiscal year spending using current revenues. Did it run a shortfall during the year? (New Jersey ranks 49th.)
Long-run solvency measures whether a state has a hedge against large long-term liabilities. Are enough assets available to cushion the state from potential shocks or long-term fiscal risks? (New Jersey ranks 50th.)
Service-level solvency measures how high taxes, revenues, and spending are when compared to state personal income. Do states have enough “fiscal slack”? If spending commitments demand more revenues, are states in a good position to increase taxes without harming the economy? Is spending high or low relative to the tax base? (New Jersey ranks 24th.)
Trust fund solvency measures how much debt a state has. How large are unfunded pension liabilities and OPEB liabilities compared to the state personal income? (New Jersey ranks 39th.)
For a complete explanation of the methodology used to calculate New Jersey’s fiscal health rankings, download the full paper and the dataset at mercatus.org/statefiscalrankings.
To read all our work on New Jersey, go to mercatus.org/states/newjersey.