U.S. News and World Report says state is fifth-worst hit by effects of Great Recession

BY JOE TYRRELL

NEWJERSEYNEWSROOM.COM

IIt will come as no surprise to residents, but New Jersey is a state of pain as a result of the Great Recession.

A new analysis by U.S. News and World Report ranks the state as fifth worst in the total effects of tax increases and spending after the Wall Street financial meltdown wounded the economy.

Counting the new burdens borne by residents in terms of higher costs and loss of services, the magazine's "pain index" put the average toll on New Jerseyans at $602 apiece.

The per-capita tax impacts here have been minor so far, about $6, according to the magazine. That could change as a result of the other part of the equation, though, a sharp drop in state aid to schools and towns on top of job losses.

The report calculates the negative effect of spending cuts on New Jerseyans at $596 apiece. The state has a list of big-ticket policy problems: cuts in education spending; a sharp drop in property-tax rebates; layoffs of state employees; skipped payments to the already shortchanged state pension fund.

The cumulative effects of those losses in state aid are still playing out in towns and school districts, many of which are following through with their own layoffs and firings, multiplying the economic hurt.

New reports about state and local finances indicate the problems are continuing. The market value of the state's pension fund investments drifted down to less than $66.9 billion as of June 30, compared to $67.6 billion a month earlier.

In a report to the State Investment Council on July 15, Ray Joseph, acting director of the division of investment, cited downturns in domestic and foreign stocks and a lack of sufficient holdings of U.S. Treasury bills.

State consultants on July 14 conceded Trenton's new effort to restrict local tax hikes with a lower cap on increases already suffers the same flaw as previous caps. Health insurance costs, which have soared over the past 25 years, are outside the restrictions.

Aon Employee Benefits Consulting recommended price increases of 11.7 percent for municipalities and 5.7 percent for school districts enrolled in state health care plans. It is unclear whether the weak national reforms labeled "Obamacare" will slow the dramatic rise in health insurance bills and taxes.

If there is a bright side for New Jerseyans, it's this: they don't live in Alaska.

The effects of the Great Recession have been more severe on residents there than anywhere else in the country. Underscoring former Gov. Sarah Palin's walk away as the crisis hit, the magazine found Alaskans have suffered "total pain" of $1,265 per person.

Unusually, Alaska lacks either a state income or sales tax, relying heavily on oil royalties. When they dry up, as with the drop in demand caused by the poor economy, the state has no plan B, other than to cut education funding.

A distant second, California's problems are more typical, reflecting the collapse of housing markets and implosion of local economies in many, but not all, communities.

California has socked residents with an average of $312 in new taxes and fees, coupled with $543 in reduced services, especially in education, according to the survey. Panic has spread from the housing market to the halls of power, with Gov. Arnold Schwarzenegger proposing to cut state employee salaries to minimum wage.

According to the survey, the top 10 suffering states are:

1) Alaska: $1,265

2) California: $855

3) Wyoming: $698

4) Rhode Island: $619

5) New Jersey: $602

6) Delaware: $453

7) Hawaii: $444

8) South Carolina: $475

9) Utah: $437

10) Oklahoma: $470

New York comes in 11th worst, thanks to an average of $419 in new taxes. But Pennsylvanians, despite some high-profile cuts like the closing of some park facilities,

have averaged only about $55 in negative impacts, according to the magazine.

And a dozen states are actually doing better now than in 2008, at least as measured by taxes and services. The winners include Connecticut and Massachusetts in the Northeast.

But North Dakota is the undisputed champ of these rankings, with a recession performance dwarfing all other states. A sparsely populated state which operates its own conservatively run bank, North Dakota has largely avoided the effects of housing bubbles and Wild West speculation generated elsewhere by private financial institutions.

As a result, in the middle of the national economic mire, North Dakota has been able to cut taxes by $301 and increased services by $700 per person over the past two years, according to the study.

Joe Tyrrell may be reached at

jtyrrell@newjerseynewsroom.com