N.J. budget pressure detailed

TRENTON - New Jersey faces a series of increasingly urgent budget pressures, including keeping pension and health insurance promises to retirees, funding health care for the poor, and repairing aging roads and bridges, three independent experts who published a report examining the state's financial condition said Thursday.

The trio, led by former Federal Reserve Chairman Paul Volcker, is taking an unvarnished look at the budgetary strains facing six states: New Jersey, New York, Virginia, Illinois, Texas, and California.

Their group, the State Budget Crisis Task Force, was in Trenton to discuss its findings as reports on New Jersey and Virginia were released.

Former New York Lt. Gov. Richard Ravitch and Richard Keevey, from the School of Public Affairs and Administration at Rutgers-Newark, also contributed to the report.

The analysis describes the spiraling retiree and health-care costs that are draining all state budgets. In New Jersey, unfunded liabilities to retirees are nearly $85 billion despite sweeping benefits changes enacted last year.

New Jersey also needs to fund its unmet infrastructure needs, which the report estimates to be at least $133 billion for transportation, wastewater treatment, and drinking water over the next decade.

"It became very clear to many of us that . . . most states were on the verge of being on unsustainable paths for true fiscal balance. The reasons for this, which are almost uniformly true, are that the cost of pensions and other retiree payments, and the costs of health care - and Medicaid, in particular - are rising at rates far greater than the rates at which taxes are being collected," Ravitch said.

New Jersey's reliance on income and sales taxes to fund nearly two-thirds of its budget also is problematic because collections fluctuate depending on the economy. Untaxed goods and services and untaxed Internet purchases have further eroded the sales tax base, the report found.

The task force cautioned against using gimmicks to balance the state budget, as governors in both political parties have done, such as raiding funds dedicated to a specific area, such as transportation, to fund general operations or borrowing to run day-to-day government.

The task force didn't offer specific recommendations. But when asked directly whether the state would need to raise taxes to meet its revenue challenges, Ravitch said, "My guess is ultimately there will have to be more revenue to meet the basic obligations the state has committed to."

More broadly, the experts suggested that state leaders adopt multiyear budget forecasting and replenish the rainy-day fund depleted by the most recent recession.