IDENTIFYING THE POLITICAL ECONOMIC TIDE SHAPING MAJOR PUBLIC EXPENDITURE TRENDS IN NEW JERSEY DURING THE LAST DECADE

Abstract

Governor Codey has proposed a $27.4 billion budget for fiscal year 2006,1 which is a record$614 million or 2.2 per cent below the budget enacted in FY2005, representing the largest spending cut in the history of the State.2 The proposed budget reduces reliance on non-recurring budget actions by 70 per cent from $2.86 billion in FY05 to$891 million in FY06 and provides for $2.4 billion in spending reductions, including nearly$1.5 billion in actual cost cutting actions. Increases in mandatory funding needs of approximately $1.4 billion, including$289 million for Medicaid, is a major component of the State’s widening budget gap problem. The challenge of balancing the State budget is even more daunting when, as noted in the FY2006 Budget in Brief (BIB) document, it is recognized that nearly three-fourths of the money that the State receives goes out in State Aid and Grants to municipalities and school districts, direct property tax relief, health care and prescription drug coverage for seniors and the poor, support for higher education, and community programs for the disabled. The remaining 12 per cent of State spending is allocated for the operating budgets of the sixteen State departments in the Executive branch with a majority of spending on State Police, courts and prisons, institutions for veterans, mentally ill and developmentally disabled and highway maintenance.3 The Governor’s Budget Message will be followed by Budget Hearings before the New Jersey Legislature gets ready to enact the FY 2006 Budget through the Appropriations Act before the start of the next fiscal year on July 1, 2005. Between now and then, expenditure items in particular will be examined carefully against revised revenue estimates by both the Governor and the Legislature since it is a constitutional requirement to balance the Budget. The passage of the Appropriations Act marks the start of a new year in State spending from the State General Fund.