New Jersey and Chris Christie’s economy

Last night at the Republican debate, when asked a question about the economy of New Jersey during his tenure, Gov. Chris Christie said the following: “If you think it’s bad now you should have seen it when I got there.”

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Sound familiar? A hint of Barack Obama in that statement?

How is New Jersey doing economically?

The Mercatus Center at George Mason University recently published a report that ranks states based on their fiscal solvency.

In a nutshell, this is how New Jersey did:

For FY2013, NJ ranked 50th in budget solvency. This measures whether the state can meet its fiscal year obligations.

The Garden state also ranked 50th for long-run solvency under Mr Christie’s watch. This indicates potential difficulty in meeting long-term obligations

The fiscal condition of New Jersey was ranked 49th.  The fiscal condition index is the sum of the cash, budget, long-run, service-level, and trust fund solvency indexes.

The report summarizes that the low fiscal condition in New Jersey is largely due to two factors: structural budgetary imbalance and climbing pension and Other Post-Employment Benefits (OPEB) obligations.

New Jersey has struggled to balance its budget for more than a decade. The state’s tax system depends heavily on the income tax and in particular on high earners, leaving revenue collections vulnerable to market downturns.

Over two decades, the state did not make consistent annual payments to the pension system. Additionally, debt was incurred to finance school construction and the pension system.

The result is an accumulation of unfunded liabilities as well as ongoing structural imbalance in the budget, and rising outstanding obligations that are placing increasing demands on state resources.

The state’s CAFR reports that long-term debt obligations increased by $6.6 billion, $5 billion of which represents the annual required pension contribution.51 New Jersey’s unfunded pension obligation totals $42 billion; it is 60 percent funded according to actuarial reports issued in FY 2013. On a market valuation or “guaranteed-to-be-paid” basis, the unfunded liability is $135 billion, or 27 percent of residents’ personal income. On a risk-free basis, the system is 32 percent funded.

Total bonded debt is $40 billion, or $4,556 per capita, representing 8.2 percent of New Jersey residents’ total personal income.