Tuesday, February 7, 2017

2017-18 Looks Like Another Bad Year for State Aid

State Aid is Zero-Sum.
Accept It

Gentle Reader, we do not know if Christie will allow any state aid redistribution, will flat-fund all districts yet again, or even attempt to implement his so-called "Fairness Formula."

But one thing we can rule out is any significant increase in state aid as indications mount that it will be another bad year budgetarily for New Jersey.

The State Treasury created the FY2017 budget with an expectation that revenue would increase by 3.6% (which is $1 billion), but 3.6% isn't happening.

In December 2016, the Treasury said that revenues were only up by 2.1%.

In January 2017, things are worse, with the Treasury saying that revenues are only up by 1.7%.

These numbers are for FY2017 and FY2018 could be better (especially if people start taking more capital gains), but we are below where we forecasted ourselves being at this time last winter.  Persistently low revenue also makes Fitch and Moody's more likely to follow S&P in downgrading our debt, which will mean higher borrowing costs for New Jersey.

And even in good years, growth in the PHD costs of Pensions, Healthcare, and Debt exceed or equal New Jersey's revenue growth.

On top of low revenues so far, the tax cuts for the Transportation Trust Fund will start to eat into revenue and the state must reserve more money to make quarterly pension payments.

I'll let real experts ascribe causation to NJ's bad revenues and forecast FY2018, but I know this: Things Look Bad and the NJEA/Education Law Center's demand "Just Fund the Formula" is more ridiculous than ever.
Adjusted for Inflation, New Jersey's Quarter Revenues are
Still Lower than They Were Pre-Recession
Source: Pew Fiscal 50

And for anyone who thinks this mess is entirely Christie's fault and things will get better after we have a new governor and higher taxes, look at Connecticut, whose FY2018 deficit is yet again 8% of state revenue. ($1.5 billion out of $19 billion)

What this means we have to fight even harder for redistribution because fairness isn't going to come through new spending.

Sorry everyone, but ZERO-SUM RULES.  We have no choice but to redistribute state aid.


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