New Jersey's Financial Struggles Continue as Citizens Leave the State

View from Jersey City, NJ.Photo byJoey PedrasonUnsplash

The State of New Jersey has not had a great time of it in the 21st Century. At one point in history, the state was an economic powerhouse complete with strong manufacturing, transportation, and financial sectors driven by a growing population and the nearby cities of Philadelphia and New York. While the state's geographical advantages remain, its economic strength is no longer.

So too for its popularity. One of the fastest-growing states in the nation during the early and mid-20th century, New Jersey has now experienced a population decline in three out of the last four years. Not only is this a reflection of how attractive the state is compared to others, but it has financial ramifications as well. A declining tax base for a debt-heavy state like New Jersey can have severe consequences.

The population decline is not just part of an aging population, either - many states experienced population growth during the same period. Instead, New Jersey has made the list of states with a negative "net migration" inside the nation for several years. The net migration figure is used to determine, absent births and deaths, where existing residents are moving to and from in any given year. In 2019, 2020, 2021, and 2022, this number was a negative figure for New Jersey.

Northern states have long had some outbound residents as retirees head for milder winters and tax-friendlier environments each year. With the highest property tax rate in the nation, few fixed-income pensioners or retirees would consider New Jersey a "first-choice" state economically. And the long-term outlook isn't much better: the state currently ranks 49th in fiscal stability, indicating more revenues (taxes) may be needed to stave off insolvency.

Atlantic City pier.Photo byKevin JarrettonUnsplash

It isn't all bad news for the state, luckily. New Jersey's 2023 budget contained a surplus and a full payment to the state's pension systems, which had routinely received pennies on the dollar of what they needed to stay solvent in past years. While the budget for the '23-'24 fiscal year has not yet been released in its entirety, press releases from the Governor's Office have given a glimpse into that as well.

Governor Murphy has ensured residents there will be no new taxes in the upcoming budget, even going so far as to allude to the fact that tax cuts may be forthcoming - a welcome development for residents in the high-cost state amid high inflation nationally. The Governor also touted previous property tax relief measures in his annual "State of the State" speech:

Together, we created the ANCHOR Property Tax Relief program – a historic $2 billion investment in direct property tax relief. This is money going right back into the pockets of roughly two million New Jersey middle-class and working homeowners, seniors, and tenants – households in which well more than half of all of our residents live.

These developments are certainly welcome for New Jersey residents, but it remains to be seen if the state's economic progress is sufficient enough to cover holes in unfunded pension liabilities and other funds statewide. For now, though, the state will also need to focus on retaining its existing residents and attracting new ones if it doesn't want to see its tax revenues decline further.