New Jersey towns face much higher pension and health care costs than are projected due to poor accounting and reporting practices, according to a study by the Mercatus Center at George Mason University, in Virginia.
The study focused on Garfield and Englewood Cliffs as examples of towns that underestimate their public employee liabilities.
“By not realizing and paying their entire ‘credit card bill,’ New Jersey municipalities have created the appearance of balanced annual budgets, while putting the retirement security of public workers and the provision of government services to citizens in jeopardy,” said study co-author Eileen Norcross in a statement.
The accounting problems have left policymakers, unions and taxpayers unaware of important aspects of local government finances, said Norcross, who co-wrote the report with Roman Hardgrave.
Hardgrave said various gimmicks, including “smoothing” the value of pension fund over time, rather than using the current value, give the appearance that the state’s unfunded liability is less than one-third its actual size. Hardgrave said the unfunded liability would jump from $52 billion to $187 billion without gimmicks, and would increase to $254 billion with health care benefits added.
The state doesn’t require municipal governments to comply with generally accepted accounting principles, according to the study, which allows them to under-report their pension and health care liabilities.
New Jersey business groups have supported efforts to reduce pension and benefit commitments as a means of bringing projected spending in line with tax revenue.
The Mercatus Center describes itself on its website as “the world’s premier university source for market-oriented ideas.” It has released a series of reports critical of New Jersey government finances.