NJ Ranks Last On Mercatus' State Fiscal Condition Index
New Jersey’s fiscal condition is not good — a fact affirmed in a new report from the renowned Mercatus Center at George Mason University indicating the Garden State’s fiscal condition is the worst in the nation as of Fiscal Year 2012. The Mercatus Center analysis underscores the gravity of New Jersey’s fiscal and budgetary challenges.
“States at the bottom are there due to years of poor financial management decisions, bad economic conditions, or a combination of the two,” according to Sarah Arnett, Mercatus economist and author of State Fiscal Condition: Ranking the 50 States. New Jersey’s fiscal condition is marred high levels of debt and significant future pension and benefit obligations.
The State Fiscal Condition Index report relies on four indices: 1) Cash Solvency, 2) Budget Solvency, 3) Long-Run Solvency and 4) Service-Level Solvency.
New Jersey ranks last on both Budget Solvency, defined as a state’s “ability to create enough revenue to cover its expenditures over a fiscal year”. New Jersey is also last with respect to Long-Run Solvency, or “a state’s ability to use incoming revenue to cover all its expenditures, including long-term obligations such as guaranteed pension benefits and infrastructure maintenance”.
Under Gov. Christie, modest pension and benefit reforms have been enacted. Likewise, the State has committed to increasing payments into the pension system, starting in FY 2013. Whether this serves to move New Jersey up on this list remains to be seen. Still, this report is indicative that New Jersey has a long way to go before putting its fiscal house back in order.