Recessions wreck state budgets, but according to three former New Jersey state treasurers who spoke at the recent NJBIA Public Policy Forum, the fiscal challenges also provide opportunities to hit the reset button and think outside the box about financial planning for the state’s future.
David Rousseau, who served as treasurer in former Gov. Jon Corzine’s administration between 2008 and 2010, said the current recession is different from those New Jersey has weathered in the past because it was driven by a public health crisis that will bring about lasting changes.
“We’re going to come out of this different than we did in past recessions because how people work, where they work, is going to be completely different now,” Rousseau said. “People are going to realize that we can work differently and with this will be opportunities.”
For example, there will likely be more telecommuting by office workers who used to be in New York City, and more people and companies could be moving into suburbs in a reversal of the long-standing trend of outmigration from New Jersey, Rousseau said. New Jersey be creating policies that nurture these opportunities, instead of pushing them away, he said.
Former treasurers Andrew Sidamon-Eristoff and Ford Scudder, who both served during Gov. Chris Christie’s eight-year administration, agreed.
“Right now, the Legislature and the Governor are grappling with the problem that much of the income that is earned by New Jersey residents, especially North Jersey residents, is actually taxed by New York,” Sidamon-Eristoff said, referring to New Jersey residents who work in New York City offices.
Sidamon-Eristoff said there was a strong argument to be made that New Jersey residents who have not set foot in New York City these past nine months should have their income taxed by their home state where they are working, not New York where their employers are located.
“This is a huge issue. I’ve seen various estimates of really between $1 billion and $2 billion at stake across the two states,” Sidamon-Eristoff said. “And that’s a fiscal opportunity if we can somehow work out how to reconfigure the way we tax interstate commutation and telecommuting work.”
Scudder, who served as state treasurer from 2016-2018, said “a lot of legal and political machinations” would be required to resolve the issue, but that it “would absolutely create an opportunity from the fiscal side to really help jump-start the process to put us on sound financial footing.”
Citing the Rahm Emmanuel adage about “never letting a good crisis goes to waste,” Scudder said the state should also be using the current recession as opportunity for finally making long-term structural changes to its spending and budgeting.
“There are significant structural issues in terms of the budget that have been addressed to a certain degree over the years, but a lot of times the can was just kicked down the road,” Scudder said. “If you’re able to use this as a reset and put us on a stronger path forward where we are economically competitive and desirable across the Northeast Corridor, that would be a huge opportunity.”
To watch the entire panel discussion, which was moderated by Prager Metis National Managing Partner Lori Roth, go here.