New Jersey health benefits fund faces unsustainable borrowing challenges for next governor

The Senate Budget and Appropriations Committee convened on April 1, 2025, to discuss critical financial issues facing New Jersey, particularly concerning the state’s health benefits fund and the overall budgetary balance.

The meeting opened with a focus on the local health benefits fund, which has raised concerns among committee members. One senator described the situation as a "mess," highlighting the unsustainable borrowing from the state fund that has created a precarious financial structure. The actuaries' mid-year report indicated that the local part of the State Health Benefits Plan (SHBP) is in distress, necessitating a 19.5% premium increase to achieve a two-month reserve of expenses. This translates to a projected deficit of nearly $140 million by the end of the 2025 plan year, posing a significant challenge for the next administration.

The discussion then shifted to the state budget's balance. A senator questioned whether the budget is genuinely balanced, given the structural deficit. The response clarified that while the budget is legally balanced by utilizing reserves as revenue, it effectively spends more than it takes in. This raises concerns about the sustainability of such practices, especially as the state has increasingly relied on "below the line" appropriations, which allow for supplemental funding that may not be fully accounted for in the primary budget.

The committee also examined the implications of borrowing, particularly the $4.6 billion borrowed during the COVID-19 pandemic, which continues to influence the current budget. While this borrowing was initially intended to stabilize finances, it has led to a reliance on surplus funds to cover expenditures that exceed revenues. The consensus among committee members was that using borrowed funds in this manner is not a recommended practice in public finance.

In conclusion, the meeting underscored significant financial challenges facing New Jersey, particularly regarding the health benefits fund and the structural integrity of the state budget. The discussions highlighted the need for immediate attention and potential reforms to address these issues, which will likely fall to the next administration.