NEW REPORT: Tools for Building a Healthy Budget
For Immediate Release
April 15, 2021 – New Jersey’s budget process threatens the sustainability of state investments in public schools, health care, and reserve funds for economic downturns, according to a new report by New Jersey Policy Perspective (NJPP). By adopting budgeting best practices from other states, lawmakers can improve the budget-making process and break the cycle of politically easy maneuvers that threaten New Jersey’s long-term fiscal health.
The report, Tools for Building a Healthy Budget, makes six recommendations to de-politicize New Jersey’s budget-making process, promote transparency, and incentivize policymakers to prioritize the long-term sustainability of public investments. With these reforms in place, lawmakers would have more information available as they chart the state’s economic recovery from COVID-19.
“Once the federal aid has been spent, New Jersey faces large budget shortfalls,” said Sheila Reynertson, Senior Policy Analyst at NJPP and author of the report. “Proven budgeting best practices can help the Governor and Legislature face that challenge thoughtfully without resorting to last-minute political finger-pointing and harmful cuts to critical public services. These proven tools make room for meaningful analysis and debate about the most consequential legislation of the year by incorporating a long lens into the budget-making process.”
The report release follows the start of departmental budget hearings where, last week, lawmakers inquired about shifting to multi-year revenue projections, a best practice recommended in the report that 22 states already utilize in their budget processes. The report also recommends multi-year spending projections, also known as “current services” or “baseline” budgeting, so lawmakers know what resources are needed to keep programs and services sustainably funded; 19 states currently forecast spending beyond the upcoming fiscal year.
To prevent the executive and legislative branches from producing competing revenue estimates, the report recommends that lawmakers adopt consensus revenue forecasting. Employed by 28 states, this would result in more accurate — and less controversial — revenue projections. State lawmakers, namely Assemblyman Gary Schaer (D-Passaic), have long-sought consensus revenue forecasting, with the most recent proposals introduced in 2020 and 2014.
“The State budget reflects the priorities of government towards improving the lives of residents and strengthening communities,” said Assemblyman Gary Schaer (D-Passaic). “As a State, we have made significant strides in our budget-making process, but more needs to be done to ensure transparency and consistency in funding vital programs. Multi-year revenue and spending projections, budget stress tests, and other reforms, many of which were included in NJPP’s report, reflect needed changes that I have worked on for over a decade. Many states utilize these budget practices. In order to ensure the needs of New Jersey residents, including the most vulnerable, it is time for New Jersey to continue on this path.”
The report also recommends budget “stress tests” and a stronger “Rainy Day Fund.” Since the Great Recession, New Jersey’s reserve fund remained at or near empty, leaving the state unprepared for the current economic downturn. A healthier “Rainy Day Fund” could have prevented state lawmakers from borrowing $4.3 billion to balance the state budget during the pandemic.
