Posted on Thu, Nov. 12, 2009

N.J. at risk of economic calamity, study says

By Adrienne Lu

Inquirer Trenton Bureau

New Jersey made it onto an undesirable top-10 list yesterday, ranking high among the states most at risk of economic calamity, according to a national research group.

California is in a league of its own, but New Jersey also faces a steep climb out of the recession, according to a new study by the Pew Center on the States. Others in fiscal peril are Arizona, Nevada, Oregon, Florida, Illinois, Michigan, Wisconsin, and Rhode Island, the study authors warned.

The states' "fiscal situations are widely expected to worsen even when the national economy starts to recover," the report said.

New Jersey's "math does not add up," according to the report.

Though its property taxes are the highest in the nation and it has increased sales and personal income taxes to generate more revenue in recent years, the Garden State still faces one of the biggest budget shortfalls, the study said.

The report blamed "years of fiscal mismanagement" for "soaring debt and a persistent imbalance between what the state collects and what it spends."

The collapse of Wall Street last year further decimated New Jersey's economy. The state's long-term debt of more than $44 billion is characterized in the study as "eye-popping," and is among the highest per-capita debt loads in the country. The state's pension funds also are severely underfunded.

The report credited Gov. Corzine with taking unpopular positions in an attempt to address fiscal problems but said those efforts "have barely made a dent."

Gov.-elect Christopher J. Christie will have to make difficult decisions when he takes office in January.

At a Veterans Day event yesterday, Christie said he would seek new concessions from the state workforce of about 75,000 to reduce a projected budget gap of $8 billion.

Among the options he would consider in the next fiscal year are trimming the state's contribution to the workers' pension fund and asking for more givebacks from labor, he said.

Last week, Corzine ordered his cabinet to find $400 million in additional savings to try to balance the budget and he commanded departments to maintain a hiring freeze and restrictions on travel.

He also urged state lawmakers to refrain from spending additional money during the coming lame-duck session.

Because the 10 states cited in the study account for more than a third of the U.S. population and economic output, actions by their governments - such as tax increases or drastic spending cuts - could slow the nation's efforts to beat back the recession, the study authors said.

The group evaluated the 50 states on six criteria: change in revenue, the budget gap as a percentage of general funds, change in unemployment, the foreclosure rate, whether a supermajority is required to raise revenue or ratify budgets, and money management.

On a scale of 1 to 30, with California the worst at 30 and Wyoming the best at 6, New Jersey scored 23 and Pennsylvania 11. The national average was 17.

The Pew center studies state policy and is a division of the Pew Charitable Trusts.

Contact staff writer Adrienne Lu at 609-989-8990 or alu@phillynews.com.

This article contains information from the Associated Press.