NJ.com had an article yesterday about what has become a perennial problem in NJ state budgeting: shortfalls of revenue that the administration and legislature need to scramble to cover. The article notes that, in relative terms, the $213M hole is only 0.6% of the $35B budget. Of course, in absolute terms, $213M is a whole lot of money, and when we get to the point where we look at coming up with the funds to cover such a large gap as routine and de minimis, we have a deeper structural and cultural problem.

So how does the administration and legislature plan to fix this problem? Do they plan to cut spending? Almost certainly not. Are they going to raise taxes? Let’s hope not, because our tax burden is already one of the worst in the nation and continues to drive citizens our of our state. No. The administration and the legislature want to paper over our real revenue shortfalls by using accounting techniques to predict how much money we can expect in tax receipts and investments for additional revenue. While this may not be a terrible idea if we had anything like a fiscally responsible government, this is a gamble, to say the least.

But a huge part of the problem, as the article points out, is that our spendthrift government has so distorted our state economy, that we depend upon a very small segment of our population for predictable taxation revenue. According to Treasurer Ford Scudder:

The top 100 tax filers pay 5.5 percent of New Jersey’s income tax revenues… This reality — with such a small segment of the population driving (gross income tax) revenues and so much of the revenue collected so late in the fiscal year — creates heightened volatility in tax receipts, severely increasing the complexity of the annual budgeting process

Anyone who has run a household or a business knows that this is not a sustainable way to manage your affairs. The simple fact is that our out-of-control tax rates drive people from the state — people at all income brackets — which only serves to continually undermine the tax base on which our budgets should depend. But, of course, the problem is that when we make our state so expensive that everyone starts leaving, all we are left with is highly volatile revenue in the form of anticipated investment income and similar sources in order to claim our budget problems are fixed.

This is a real problem, everybody, and until we get legislators in the state house who are willing to speak truth to the powerful interests running our state for their own political benefit, our situation is only going to get worse.