On Aug. 2, the New Jersey Society of CPAs and the New Jersey Business & Industry Association sent a joint letter to Governor Murphy's office urging him to sign A-4090/S-1884.
The business community certainly supports this bill, as you can see from the attached May 1, 2023, letter from the New Jersey Business Coalition. However, its positive impact goes far beyond the business community. It benefits all sectors of the public and lawmakers by providing a better understanding of the state’s comprehensive financial picture.
Lawmakers, the media and the public typically focus almost exclusively on the annual state budget and overlook New Jersey’s overall financial health and what comes after the budget bill. That is covered in great detail in the Annual Comprehensive Financial Report (ACFR), which contains the full audited financial statements for the primary government, as well as all component units of the State. The most important part is the state’s financial position which reflects critically important elements of our assets, liabilities and net assets (or deficits) in some cases. The ACFR is essentially the “Annual Report” similar to what public companies issue every year to shareholders.
The ACFR generally extends beyond 400 pages and is filled with an overwhelming amount of 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 report.
Other items included are a better accounting for the long-term liabilities compared to other states; an 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 funds.
We believe this legislation would play a critical role in educating all parties on the state’s fiscal condition, which will bring more transparency and provide for better policy making.
Thank you again for considering our perspective, and both of our organizations look forward to working with the Murphy Administration to improve the fiscal climate in the State of New Jersey.