TRENTON – For the first time since accounting rules changed to require states to use more expansive definitions when calculating long-term debts, New Jersey doesn’t rank last in a conservative think tank’s annual review of state finances.

The Chicago-based group Truth in Accounting said New Jersey would need nearly $185 billion to meet its long-term obligations as of mid-2020 for bonds and employee-related benefits, which it said works out to $58,300 for every taxpayer in the state with a federal income tax bill.

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For six years in a row, ever since accounting rules changed in a way that swelled the figure for the long-term pension debt, New Jersey ranked at the bottom in terms of what TIA calculates to be the “taxpayer burden” – but no longer.

Connecticut is now ranked worst by that measure for the first time since fiscal 2013, back when New Jersey ranked third from the bottom, also better off than Illinois.

It's all relative

“It’s not that New Jersey got better,” said Sheila Weinberg, the founder and chief executive officer of Truth in Accounting. “It’s that Connecticut got worse, so New Jersey is now our second-worst state.”

New Jersey’s debt per taxpayer calculation rose slightly from $57,900 in 2019 to $58,300 in 2020, although the overall shortfall dropped by $4.4 billion from a year earlier. The report says New Jersey has $31.7 billion in available assets to put toward $216.9 billion in total long-term bills.

Those include $100 billion in pension obligations and $69 billion in promises for health benefits for retired public workers, with the pension debt up and the healthcare debt down compared to a year earlier.

“New Jersey just seems to have a lot more on even a per taxpayer basis than other states,” Weinberg said.

The report reflected annual financial reports for fiscal 2020, through June 30, 2020 – which were the most recent available but are by now out of date. At the beginning of the pandemic, the pension funds were hurt by a downturn in the markets that have rebounded and then some over the last 15 months.

Record returns

The state Treasury Department’s Division of Investment announced Wednesday that the pension fund investments had returned 28.63% in fiscal 2021, the 12 months ending June 30. The fund’s value was an estimated $94.4 billion, up more than $17 billion from a year earlier.

In the current budget, fiscal 2022, New Jersey made the full payment into the pension funds recommended by actuaries, around $6.9 billion, for the first time in a quarter-century.

“This has been a historic year for New Jersey’s pension fund, both in reaching the milestone of making the first 100 percent actuarially determined contribution in 25 years, and now, with today’s news regarding our returns for the year,” said State Treasurer Elizabeth Maher Muoio. “Taking a look at the 20-year snapshot, this year’s returns dwarfed any annual performance over the last two decades, far surpassing the next highest return, which was 17.97 percent in 2011.”

Weinberg said to think about the debt like a credit card and that the actuary recommendation is like a minimum required monthly payment.

“If you’re not paying even your minimum payment, you’re going to just continue to deteriorate,” she said. “So, the state is finally … going to go ahead and pay the minimum payment on their pension credit card. They are not going to pay the minimum payment on their retiree health care credit card.”

New Jersey’s finances were given an F grade by the group, which assigns that grade to any state where the debt works out to more than $20,000 per taxpayer. Ten states got failing grades.

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