NJ’s Empty Rainy Day Fund on Track to Get Some Help Under Gov. Murphy
Most states in the U.S. could run on their emergency savings for at least two weeks should a major natural disaster or financial crisis drain their general funds.
New Jersey wouldn't last one day.
New Jersey is one of just a few states with nothing in its rainy day fund. New Jersey's pot of reserves has now been empty for a decade, since the state drew from the fund during the Great Recession.
"Many states also used their rainy day funds as a financial cushion during the last recession, but they've used the economic recovery that's happened since to steadily replenish and expand their funds to prepare for the next recession. And New Jersey hasn't," said Justin Theal, officer with The Pew Charitable Trusts.
Pew's analysis of state budget data found that more than half the states in the U.S. had more money in their rainy day funds in fiscal 2018 than in fiscal 2007. Thirty-two states pumped close to $10 billion total into their rainy day funds last fiscal year.
"New Jersey's trend really runs counter to the national trend," Theal said.
The Garden State is no stranger to projected budget surpluses. The challenge for the state has been actually holding on to that money and not diverting it elsewhere.
Gov. Phil Murphy's spending plan for Fiscal Year 2020 projects a surplus of $1.2 billion. This fiscal year, Murphy's first as governor, is on track to close with a surplus of more than $1 billion.
"One thing we can't do is simply look at our surplus as a pot of money to be raided," Murphy said at a recent press event. "Every dollar we take away from our rainy day fund, no matter how well-intentioned we think the cause may be, is a dollar we won't have for things like hurricane response, to clean up a major chemical spill, god forbid, cushion a national economic recession, or to respond to a dictate from Washington that we haven't budgeted for."
Sheila Reynertson, senior policy analyst for progressive New Jersey Policy Perspective, said New Jersey lawmakers have had "an unhealthy relationship with the state's surplus" since the recession.
"The budget surplus Gov. Murphy is proposing in his budget follows best practices from over a decade ago when New Jersey boasted a coveted AAA credit rating," she said.
Speaking to reporters ahead of Murphy's budget address in early March, state Treasurer Elizabeth Muoio said ratings agencies frequently inform the state that it's an outlier in terms of reserves on hand.
"We are not adequately prepared for a downturn in the economy as a result," Muoio said, noting the surplus can't be looked at as an ATM.
Contact reporter Dino Flammia at firstname.lastname@example.org.