New Jersey

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Summary

On the basis of its fiscal solvency in five separate categories, New Jersey ranks 48th among the US states and Puerto Rico for its fiscal health. On a cash basis, New Jersey has between 0.63 and 2.00 times the cash needed to cover short-term liabilities. Revenues cover 94 percent of expenses, for a deficit of $396 per capita. New Jersey is reliant on debt financing, with a net asset ratio of −1.46. Liabilities are 2.1 times the size of total assets, resulting in a long-term liability per capita of $9,285. Total debt is $41.84 billion. Unfunded pension liabilities are $188.40 billion on a guaranteed-to-be-paid basis, and other postemployment benefits (OPEB) are $66.80 billion. These three liabilities are equal to 58 percent of total state personal income.

Key Terms

  • Cash solvency measures whether a state has enough cash to cover its short-term bills, which include accounts payable, vouchers, warrants, and short-term debt. (New Jersey ranks 38th.)
  • Budget solvency measures whether a state can cover its fiscal year spending using current revenues. Did it run a shortfall during the year? (New Jersey ranks 49th.)
  • Long-run solvency measures whether a state has a hedge against large long-term liabilities. Are enough assets available to cushion the state from potential shocks or long-term fiscal risks? (New Jersey ranks 50th.)
  • Service-level solvency measures how high taxes, revenues, and spending are when compared to state personal income. Do states have enough “fiscal slack”? If spending commitments demand more revenues, are states in a good position to increase taxes without harming the economy? Is spending high or low relative to the tax base? (New Jersey ranks 20th.)
  • Trust fund solvency measures how much debt a state has. How large are unfunded pension liabilities, OPEB liabilities, and state debt compared to the state personal income? (New Jersey ranks 40th.)

For a complete explanation of the methodology used to calculate New Jersey's fiscal health rankings, download the full paper and the dataset at mercatus.org/statefiscalrankings-2016-edition.