#48 | Ranking the States by Fiscal Condition: New Jersey

Summary

On the basis of its solvency in five separate categories, New Jersey ranks 48th among the US states for fiscal health. New Jersey has between 0.93 and 2.44 times the cash needed to cover short-term obligations. Revenues only cover 89 percent of expenses, with a worsening net position of –$798 per capita. In the long run, New Jersey’s negative net asset ratio of 2.98 points to the use of debt and large unfunded obligations. Long-term liabilities are higher than the national average, at 388 percent of total assets, or $18,928 per capita. Total unfunded pension liabilities that are guaranteed to be paid are $272.54 billion, or 49 percent of state personal income. OPEB are $85.42 billion, or 15 percent of 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 30th.)
• 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 and OPEB liabilities compared to the state personal income? (New Jersey ranks 38th.)

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.

To read all our work on New Jersey, go to mercatus.org/states/new-jersey.