The full Assembly on Thursday unanimously approved legislation sponsored by Assemblyman Troy Singleton, Assembly Speaker Vincent Prieto and Assemblymen John Burzichelli and Gary Schaer to help New Jersey address its burgeoning debt load by creating a precise picture of what the state can afford to take on.
“The reports last week about our mounting state debt are disconcerting to say the least,” said Singleton (D-Burlington). “Fiscal responsibility can’t be achieved blindly. We need a comprehensive and precise forecast on what we can and cannot afford in order to create more sound fiscal policies for the future.”
“Debt affordability can’t be the elephant in the room when it comes to discussions about our fiscal future,” said Speaker Prieto (D-Bergen/Hudson). “To continue to let it go unchecked will only further jeopardize our ability to establish a stable and improved credit standing with investors.”
Underscoring the need for a better picture of New Jersey’s debt affordability, the sponsors pointed to the annual debt report released by the State Treasury Department last week, which showed that the state’s long-term debt increased to a record $78.4 billion last year, up $6.6 billion from the previous year in great part because of the increase in pension and health-benefit costs for public employees.
The bill (A-961) would require the state to include a state debt affordability analysis in the annual State Debt Report in order to provide a clear, data-driven framework for the executive branch and the legislature to evaluate and establish priorities for legislation that may impact the amount of state debt during future fiscal years.
“We need to take a step back, just like any responsible family would, and ask ourselves how much debt we can realistically afford to take on,” said Burzichelli (D-Cumberland/Gloucester/Salem). “In the face of this growing burden, we need a clear and accurate picture to help us make the tough decisions.”
“Investors have taken notice of our mounting debt, with Moody’s downgrading our outlook to negative late last year,” said Schaer (D-Bergen/Passaic). “This is an assured warning alarm that we need to have a long and serious discussion about how we fund our long-term liabilities moving forward.”
Under the bill, the State Debt Report, which is submitted to the Commission on Capital Budgeting and Planning, would be required to include a detailed analysis and narrative discussion of the state’s ability to afford an increase in its overall debt by incurring additional debt, and recommendations on the affordability of any such increase.
The analysis would include: (a) An estimate of revenues available for the next 10 fiscal years to pay debt service on the debt listed in annual State Debt Report, including state general revenues plus any revenues specifically pledged to pay debt service; (b) An estimate of additional debt issuance for the next 10 fiscal years for the state’s existing borrowing programs; (c) A schedule of the annual debt service requirements, including principal and interest allocation, on outstanding state debt and an estimate of the annual debt service requirements on the additional debt projected for existing borrowing programs for each of the next 10 fiscal years; (d) The calculations and listing of pertinent debt ratios, including, but not limited to, debt service to state revenues available to pay debt service, debt to state per capita personal income, and debt per capita for the state’s net tax-supported debt; (e) The estimated debt capacity available over the next 10 fiscal years benchmarked to various debt ratios of debt service to state revenue exceeding current actual percentages; (f) A comparison of the New Jersey state debt ratios with the comparable debt ratios for the 10 most populous states; (g) An overview of the state’s general obligation credit rating and a review of the criteria used by municipal securities rating services in rating governmental obligations; and (h) Such other information as the Commission on Capital Budgeting and Planning deems relevant to the foregoing matters.
Any state agency, independent authority, or other entity issuing debt secured by state revenue, or assisting in the issuing of that debt, must also provide information determined necessary by the commission in order to complete the debt affordability analysis and recommendations on affordability of additional debt.
The bill now awaits consideration by the Senate.