A progressive group called on New Jersey to do away with competing revenue forecasts drafted by the Office of Legislative Services and the State Treasury Thursday, cautioning the practice leads to politicized budget negotiations and encourages reliance one one-shot revenue sources.
New Jersey Policy Perspective recommended the Garden State adopt consensus forecasting, a practice that aims to increase forecast accuracy that is already in use in 28 other states.
“The State budget reflects the priorities of government towards improving the lives of residents and strengthening communities,” said Assemblyman Gary Schaer (D-Passaic). “As a State, we have made significant strides in our budget-making process, but more needs to be done to ensure transparency and consistency in funding vital programs.”
New Jersey governors and legislators butt heads over revenue projections on an annual basis, even when a single party holds complete control over Trenton.
That happened in September, when OLS revenue projections came in nearly $1.4 billion higher than those provided by the Treasury. The mismatch complicated an already fraught process to fund the state government during the pandemic.
New Jersey Policy Perspective suggested a series of other reforms to enhance annual budget negotiations, including the adoption of multi-year spending and revenue projections. They argue the practice would provide lawmakers with a clearer picture of the state’s finances.
“Without the full fiscal picture, budget policy proposals can become fodder for debate based on political potshots rather than credible, impartial information,” the group said in a report released Thursday.
Twenty-two states project revenues for at least three years when budgeting, and 19 states forecast expenses for future years. Five of them release multi-year projections.
“If New Jersey enacted both current service budgeting and multi-year revenue forecasting, its politicized budget debate could be a thing of the past,” the report said. “High-quality, long-term revenue and expenditure forecasting would shine a light on the underlying structural imbalance between revenue and spending that has chronically held back New Jersey’s economy.”
The report also recommended New Jersey devote more attention to its rainy day fund, an undesignated surplus fund filled when revenue collections exceed estimates.
Lawmakers have often ignored the fund, which remained empty for more than a decade before seeing investments in the 2019 fiscal year. The pandemic has drained that fund.
The group also urged the state implement stress tests into its budgeting process, a practice they say would allow New Jersey to develop response plans to massive revenue shortfalls, as was anticipated in the early months of the pandemic.
“Proven budgeting best practices can help the Governor and Legislature face that challenge thoughtfully without resorting to last-minute political finger-pointing and harmful cuts to critical public services,” said NJPP Senior Policy Analyst Sheila Reynertson, the report’s author. “These proven tools make room for meaningful analysis and debate about the most consequential legislation of the year by incorporating a long lens into the budget-making process.”