NJCPA Legislation to Educate Lawmakers/Public on New Jersey’s True Fiscal Condition Passes Senate Committee
Legislation (S1884) providing lawmakers and the public with a user-friendly summary of New Jersey’s comprehensive financial picture passed the Senate State Government Committee on Nov. 7. It has already passed the Assembly, and the next step in the legislative process would be a vote by the full Senate. This bill was drafted by the New Jersey Society of CPAs and New Jersey Business & Industry Association.
This plain-language summary would include “off-budget” items such as the state’s long-term liabilities and independent authorities. It goes beyond the annual budget, though the bill does include several budget transparency provisions.
Lawmakers, the media and the public typically focus almost exclusively on the annual state budget and overlook New Jersey’s overall financial health, which is covered in great detail in the Annual Comprehensive Financial Report (ACFR). The ACFR contains critically important items not covered by the annual budget, such as billions of dollars in unfunded liabilities, assets, spending, debt and financial information on independent authorities. The ACFR provides a sobering picture of New Jersey’s financial position. For fiscal year 2020, the state had net liabilities of $221 billion.
NJCPA member Robert Allison, CPA, provides testimony in support of the ACFR legislation to the Assembly State and Local Government Committee on Oct. 17, 2022
The ACFR is so long (the 2020 edition is 420 pages) and filled with so much technical accounting language, that it’s typically ignored. Many people do not even know that it exists. Furthermore, there is no statistical comparison of key items to comparable states that would help to put the state’s fiscal health in perspective.
This bill requires the State Auditor to release annually a brief, user-friendly report on the ACFR. This would allow everyone to be more knowledgeable about the state’s true financial condition. This summary would also include per capita comparative statistics from Mid-Atlantic and Northeast states. Furthermore, it would require the State Auditor, at the beginning of the annual budget process, to appear before the Senate and Assembly budget committees to testify on the ACFR report.
Other items included are a better accounting for the long-term liabilities compared to other states; an honest accounting of how lawmakers projected revenues and spending in the budget; identifying structural gaps (e.g., needing to ramp up school funding or pension funding increases in the budget.); and a better accounting of both the surplus and rainy-day fund and how the budget would handle stress like a recession.
This legislation would play a critically important role in educating all parties on the state’s fiscal state, which will bring more transparency and provide for better policy making.
Read our letter to the Senate State Government Committee