RELEASE: When in a Hole, Stop Digging: New Jersey’s Budget Woes and How to Address Them

New GSI report released as follow-up to the 2024 Fiscal Cliff Explained 

Click here to view the report

The Garden State Initiative today released a report titled “When in a Hole, Stop Digging: New Jersey’s Budget Woes and How to Address Them” by Professor Thad Calabrese, Professor of Public and Nonprofit Financial Management at the Robert F. Wagner Graduate School of Public Service at New York University where he currently serves as the head of the school’s finance specialization.

The report focuses on New Jersey’s structural deficit – and the allocation of the state’s surplus – bolstered by $16 billion in COVID relief funds.  GSI’s report details the spending by branches of state government – noting the executive branch increased by 81% from 2018-2025.  The report also breaks down spending by key areas that received increased funding over the past five years.

The report examines three key areas that received increased funding: education, programs to combat poverty, and transportation.

New Jersey has a highly regarded public education system. It is ranked in the top 3 nationally, but the state spends more per pupil than 47 other states; further, it spends more per pupil than the two states ranked higher (Massachusetts and Connecticut) Did the COVID money or the state’s increase in spending have any effect on student learning outcomes? As measured by the NAEP educational assessment – there has been a downward trend in learning outcomes from before the pandemic to after. Despite billions of extra dollars allocated to schools, student performance actually went down.

New Jersey also spent billions on child welfare and anti-poverty programs using federal COVID funds, and has included some of these programs in its ongoing budget. In 2019, nearly 171,000 children in New Jersey were a part of a family below the poverty line. In 2023, despite billions in additional federal spending, nearly 194,000 children in the state were in families who were below the poverty line. While the extra spending may have prevented even more children from falling into poverty, there is little evidence the resources improved outcomes meaningfully.

Billions of extra dollars were also spent on transportation since the pandemic. The bottom line? On-time rail performance for NJ Transit was 94 percent in 2020 before the pandemic, and is 89 percent as of January 2025. Further, the distance between failures has plummeted from nearly once every 89,000 miles to once every 50,000 miles.

The report concludes that New Jersey should take the opportunity to learn from this analysis and seek policy changes that can make the state an attractive place for businesses and families. These changes should include:

1. Reducing the tax burden on individuals and businesses to boost competitiveness with other states that are currently drawing in families and companies.
2. Focusing state spending on essential public services while cutting back on non-essential areas.
3. Ensuring the state’s budget is fiscally balanced, where annual revenues fully cover annual expenditures.
4. Enacting reforms to the state’s pension and retiree health care systems to reduce the annual costs. A likely solution will involve higher worker contributions, longer vesting periods, and less generous benefits

“This report clearly presents the state’s return on investment for taxpayers and I think the taxpayers will be disappointed” stated GSI President Audrey Lane. “While other states took the opportunity to use COVID relief funds to provide guardrails for policy reform that would have improved affordability for all, New Jersey squandered its opportunity.”

Lane recommends that legislators pay attention to Thad Calabrese’s policy recommendations.  “The report clearly states New Jersey’s critical economic challenges and presents a clear, practical plan to begin addressing the downward trajectory,” added GSI President Audrey Lane. Lane hopes legislators follow the lead during budget season- which she noted officially starts today.