NOVEMBER 29, 2018 Truth and Integrity in State Budgeting: 2018 Preview Prepared by: William Glasgall Executive Vice President and Director, State and Local Initiatives

Presented at the 2018 Rutgers Governmental Accounting & Auditing Update Conference

The Volcker Alliance Research Network Universities CUNY Fla. International Georgia State U of Kentucky U of California, Berkeley U of Illinois-Chicago U of Illinois-Springfield U of Utah Consultants MMA Barrett & Greene New Products/Outreach State Budget Report Cards State Budget Data Lab Fiscal Policy Conferences with Federal Reserve Banks, University Partners Legislative Testimony and Technical Assistance Forthcoming: Truth and Integrity in State Budgeting: Preventing the Next Fiscal Crisis Follow-up Research: Rutgers Business School University of Minnesota 5 Partner Schools

The Volcker Alliance on State Budgets

Volcker Alliance State Budget Grades States received average FY 2016-18 grades of A to D-minus, plus annual grades for each year. in five areas: • Budget forecasting–how and whether states estimate revenues and expenditures for the coming fiscal year and the long term; • Budget maneuvers—dependence on one-time revenues to offset recurring expenditures; • Legacy costs—how well states fund promises made to public employees for pensions and retiree health care; • Reserve funds—the condition of general fund reserves and rainy day funds and rules governing their use and replenishment; • Budget transparency—disclosure of budget info, including debt, tax expenditures, estimated cost of deferred infrastructure maintenance.

Best 3-Year Average Grades, FY 2016-18 Grades arranged by category

Worst 3-Year Average Grades, FY 2016-18 Grades arranged by category Inadequate pension, OPEB funding & contributions drove NJ’s mark. Only KY has worse state pension funding. But its average grade rose to C from D- because it fully funded annual pension contributions in FY 2017-18.

New Jersey’s Budget Grades, FY 2016-18

Consequences of Delaying Tough Budget Choices Debt, Pensions, OPEB Burdens Reduce Fiscal Flexibility

Consequences of Delaying Tough Budget Choices Increased vulnerability to economic downturns

Questions?

Contact Information William Glasgall Senior Vice President and Director of State and Local Initiatives wglasgall@volckeralliance.org | 646-343-0152 | Twitter @Wglasgall https://www.volckeralliance.org/