State of the State: New Jersey in 2011

This is the eighth of a ten-part series on the 2011 State of the State (SOTS) speeches in states with the ten worst projected relative budget deficits for FY 2012. Budget data is from the Center on Budget and Policy Prioritiesâ?? (CBPP) recent budget report, and SOTS speech text is from Stateline. CBPPâ??s data on statesâ?? FY 2012 budget deficits as a percentage of their FY 2011 budget is the benchmark for relative budget deficits.

According to CBPP, New Jersey faces the third worst relative budget deficit in the nation in FY 2012, equaling roughly 37.4 percent of the stateâ??s FY 2011 budget; and the fourth highest absolute budget deficit, totaling over $10.5 billion.

On January 11, 2011 New Jersey Governor Chris Christie delivered his SOTS address (full text available here). Governor Christie deliberately highlights successful state spending cuts, property tax caps, interest arbitration award caps, and closing consecutive budget deficits of $2 billion in FY 2010 and $11 billion in FY 2011. He then prefaces the remainder of his SOTS saying:

Instead of (providing a) long list of initiatives for the year head… (He wants) to highlight not the small things, but the major challenges that (New Jersey) has ignored for too long and that (it) must confront now. For New Jersey; itâ??s time to do the big things.

Below are the policy highlights from Gov. Christieâ??s address:

  • Spending Cuts: Gov. Christie notably says that he wants to pursue spending cuts by having every department re-write their budgets from the â??bottom up,â? rather than using their FY 2011 budgets as a starting point and trimming down.
  • Tax Increases: He pledges to not include any tax increases in his FY 2012 budget proposal, specifically saying that after 115 tax increases in the last 10 years it is time for comprehensive tax reform. He also says that in order to prevent tax increases, Medicaid and healthcare costs must be reformed (for more, see Government Reform below).
  • Economic Development: Christie suggests pursuing tax cuts and economic development incentives, however only within the context of a balanced budget.
  • Government Reform: He identifies the stateâ??s â??antiquated and unsustainable pension and benefit systemâ? as a cloud hanging over the state. Christie notes that without reform, the unfunded liability of New Jerseyâ??s pension system will grow from $54 billion to $183 billion within 30 years. In order to address this problem he proposes raising the retirement age, curbing the effect of cost of living adjustments based on actual inflation, collecting modest contributions by employees toward their retirement and contributions by the State to the pension fund. Regarding the pension system, he starkly says, â??Benefits are too rich, and contributions are too small, and the system is on a path to bankruptcy.â?

    Gov. Christie concludes his SOTS by discussing education reform. Christie has a broad vision for education reform, and emphasizes the following policy goals: promoting school choice through vouchers, increasing the number of charter schools, empowering principals, reforming poor-performing public schools, cutting out-of-classroom costs, focusing efforts on teachers and children rewarding merit rather than seniority, improving the measurement and evaluation of teachers and eliminating teacher tenure.

Policymakers in the Garden State have been engaged in high-profile budget wrangling over the past few years, and it appears that will continue as the State grapples with persistent budget deficits. For additional policy tools they should refer to the American Legislative Exchange Councilâ??s (ALEC) State Budget Reform Toolkit and Reason Foundationâ??s Annual Privatization Report 2010: State Government Privatization section. For the previous articles in this SOTS series, see: Louisiana, North Carolina, Wisconsin, California, Illinois, Nevada, Connecticut, Minnesota and Oregon.