How N.J. feeds its gluttonous state budget

By Robert Leitner 

Government programs are like fat cells — part of a larger body and often unwanted, according to a former state treasurer. The more a person diets, the more the fat cells scream for nutrients. Similarly, the more cutbacks are made to programs, the more people scream for financial help.

“The similarity is, once they are created, government programs are forever,” said former Treasurer of New Jersey Andrew Sidamon-Eristoff. “Especially if they have secured the holy grail of budgeting. You can cut them back, but sooner or later you are left with a handful of people begging for more resources.”

The New Jersey state budget was dissected by Eristoff at an event held by the Rebovich Institute for New Jersey Politics in the Mercer Room on March 1.

Eristoff served under Gov. Chris Christie for five years until July 2015, making him the state’s longest-serving treasurer in almost 40 years.

“First, let’s put the budget in proper perspective,” said Eristoff. “The $34.8 billion appropriations act that we tend to focus on is only part of the total fiscal picture. Actual state spending, including expenditures not budgeted, and spending by other state agencies, is more than twice that amount.”

Eristoff explained that tax expenditures alone could make up about $20 billion. He emphasized that the state budget is part of an integrated state and local fiscal system, and that a large portion of the act is used for state aid.

“More than 70 percent of the annual appropriations act flows through to counties or residents in state aid,” according to Eristoff. “The Appropriations Act is by no means the last word in the state’s spending priorities.”

Eristoff discussed lapses and supplemental appropriations in regards to the funding of certain programs. According to Eristoff, New Jersey routinely underfunds snow removal and other programs. The lapses and supplemental appropriations allow the state to make up for the underfunding and represent routine and welcome flexibility when dealing with the budget.

“No contemporary budget could ever fund all statutory spending commitments now on the books in New Jersey,” explained Eristoff.

Some people tend to push for dedicating certain tax revenues to fund state programs, but Eristoff seemed to dislike this idea.

“If every tax was dedicated to a popular program, it would be hard to support the less sexy, but still important programs,” said Eristoff. “Do we really want to invite that level of inflexibility into our government? Shouldn’t we expect our leaders to exercise a sort of judgment in setting those priorities?”

The conversation moved to the funding balance that plays a key role in different aspects of government. The ending funding balance is also known as the state’s surplus. If the balance is positive, it can help the governor get re-elected, and Eristoff helped explain the difficult side of the funding balance.

“Outside stakeholders, such as the rating agencies, use the size of the ending fund balance as a measure of the state’s health,” said Eristoff. “Accordingly, every treasurer pushes to build the largest fund balance to protect or earn higher bonds ratings.”

Eristoff was asked to discuss his views on certain taxes, such as corporate income tax and personal income tax. As for corporate income tax, his view was clear, as he stated that it is “anachronistic,” and that corporations run circles around state taxes. Eristoff provided a longer explanation on personal income tax, including that income tax has been modernized.

“I would probably recommend to a new governor that they take a look at the inventory of paying points, and ask how do we stack up to our neighbors and then proceed from there,” said Eristoff. “I believe at the state level our objective should be to make sure New Jersey is not an obnoxious outlier. In other words, we should be unremarkable in tax policy so that we can compete on the other non-tax factors that are of course at play, like educated workforce, transportation, so on and so forth.”

Before ending the conversation, Eristoff said that there is a big difference between the U.S. treasurer and the treasurer of New Jersey, but he would like to continue in office in the future.

“It is my earnest hope to continue in public services in some form,” said Eristoff. “As to what the next step is or what I might do or not do, I really can’t speak to that right now. Again, I love the job, I love serving the people of the state of New Jersey, and I love public service.”

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