

TRENTON — In five years, New Jersey will need a budget almost 30 percent bigger than the one it has today just to cover the skyrocketing cost of its schools, Medicaid and retirement benefits for public workers, a report released today warned.

The nonpartisan State Budget Crisis Task Force — led by Paul Volcker, a former Federal Reserve chairman, and former Lt. Gov. Richard Ravitch of New York — said while officials had awakened to the daunting challenges, their recent efforts could be futile without further fiscal reform.

Based on recent growth rates, the cost of financing schools, Medicaid and retirement benefits will go up more than $20 billion over the course of the next five years — a sum that far exceeds New Jersey’s natural revenue gains and equals 63 percent of this year’s entire $31.7 billion budget.

"Ideally, the state should begin to set aside funds for benefits it intends to continue," the report said. "If that is not practical it must monitor these costs carefully, and consider ways to reduce their costs and perhaps shift more costs to the retiree."

The looming explosion in costs is fraught with political risks for either Gov. Chris Christie, a Republican who is seeking election to a second term, or for any Democratic successor next year.

Michael Drewniak, a spokesman for the governor, said the administration was "acutely aware of the challenges — and will address them directly as we always have."

But, Drewniak added, "we are not at this stage going to specify budget proposals a year away, let alone five years away."

The report’s authors — economists from all over the country — were under no such constraints. While they stopped short of giving concrete prescriptions, they said the stark reality was that the tax rates in New Jersey, already one of the highest-taxed states, would have to rise further or else residents would face sharp cutbacks in services.

"We’re all facing as a society tough, tough problems," Ravitch said. "I can only say that mistakes were made. Dumb things were done. It was totally on a bipartisan basis."

The task force first released a study of six states in July, and today it followed up with an in-depth look at New Jersey. Richard Keevey, a professor of public policy at Rutgers-Newark and former state budget director, was the lead writer.

Christie and Democrats in the Legislature won praise for tackling the distressed system of pensions and health benefits last year, when they shifted more of the costs to public workers. But the state still owes $84.8 billion after years of neglect and raiding those funds, the authors said.

The governor and Senate President Stephen Sweeney (D-Gloucester), who is thinking of running against Christie, both claimed credit for taking the first step toward fiscal sanity.

"As the Volcker-Ravitch report rightly notes, Governor Christie’s administration was the first to enact a path to reform the pension and benefits systems," Drewniak said. "Had the governor not led and accomplished these reforms, the challenges before us would be insurmountable."

Chris Donnelly, a spokesman for Sweeney, said, "We can only imagine the shape we would be in if the Senate president hadn’t forced the governor to finally make the state’s pension payments."

The task force enumerated several other concerns:

• Upgrades for transportation, waste water treatment and drinking water will cost $133 billion over the next decade.

• While Christie and former Gov. Jon Corzine, his Democratic predecessor, were "relatively successful" restraining the growth of Medicaid costs, New Jersey has "one of the most generous programs in the nation in terms of services offered and eligibility" and "expenditures over the last six years have increased on average 4 percent annually."

• The 2008 economic crisis led to huge job losses that will not be recouped until 2016 or later.

Former Gov. Jim Florio, a Democrat who was present for the release of the report in Trenton, called for the federal government to pay a bigger share of programs like Medicaid.

"Every time we call upon the states to take some smart actions ... the changes that are made may be good for the state but put the state in a competitive disadvantage," Florio said. "The federal government is going to have to take on more responsibility."

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