Although Fiscal Year 2023 marked the first time in 22 years that all 50 states in the U.S. had budget surpluses, new Pew research identifies New Jersey as one of five states that is not living within its means because of long-term revenue shortfalls exceeding spending.
“Although most states balance their budgets on an annual or biennial basis, budget documents do not offer a complete picture of their fiscal sustainability,” the Pew researchers said. “States’ annual financial reports, on the other hand, provide a fairly comprehensive view of whether revenue—composed primarily of tax dollars and federal funds—has been sufficient to cover all state spending over the short and long terms.”
Five states recorded long-term deficits over the 15-year period from 2009 to 2023, and these long-term deficits resulted in the carrying forward of deferred costs for past government services and operations, the Pew analysis found.
“Although states can withstand periodic deficits without endangering their long-term fiscal health, chronic shortfalls are one indication of an entrenched structural deficit in which, without policy action to correct the imbalance, revenue will continue to fall short of spending,” the Pew researchers said.
The analysis found that the median state accumulated enough revenue to cover 104.3% of its expenses during the 15-year period ending in FY 2023, but revenues fell short of expenses in these five states: New Jersey (95.6%), Illinois (96.9%), Massachusetts (97.2%), Connecticut (99%) and Hawaii (99.1%).
New York was the only state to reverse its long-term deficit status in FY 2023 after reducing expenses faster than revenue was declining for two years, the study found.
While New Jersey had the greatest 15-year revenue shortfall, with revenues meeting only 95.6% of expenses, Alaska recorded the largest surplus (126.9%).
Alaska was followed in the Top 10 by North Dakota (124.6%); Wyoming (120.4%); Utah (113.3%); New Mexico (110.3%); Texas (109.3%); Montana (109.2%); North Carolina (108.3%); Idaho (108%); and South Dakota (107.3%).
Pew said it was important to analyze long-term structural deficits to capture deficits that can be “papered over” in the annual budget process.
“By taking a step back and considering how 15-year total revenue aligns with expenses, The Pew Charitable Trusts aims to help states evaluate whether they take in enough money to cover their expenses or need to change course to bring their finances onto a sustainable path,” the study said.
“Rather than track cash as it is received and paid out, as budgets generally do, annual comprehensive financial reports attribute revenue to the year it is earned, regardless of when it is received, and assign expenses to the year they are incurred, no matter when the bills are actually paid.”
NJBIA has long advocated for budget reforms to address long-term structural deficits, including budget stress tests, multi-year budgeting, consensus revenue forecasting, and reforms to the public employees’ pension and health benefits system that would save taxpayers money.
“It’s a positive trend that the state continues to make full pension fund payments,” NJBIA Chief Government Affairs Officer Christopher Emigholz wrote in NJBIA’s 2025 Blueprint for a Competitive New Jersey.
“But it should also pursue pension reforms for new employees, such as increasing the retirement age and moving new employees into a hybrid cash balance pension plan.”
