NJ Fiscal Folly

Wednesday, May 03, 2006

Confirmation And A Warning

In a prior post below, I noted that Gov Corzine's budget to add 50,000 children to the NJ FamilyCare program seriously underestimated the costs. The Office of Legislative Services (OLS) now agrees with me.

The OLS analysis of the proposed budget for the Department of Health and Senior Services includes a section on the proposed NJ FamilyCare expansion (see pages 44-45). The OLS focuses on the first year of the expansion, where enrollment increases month by month, rather than the full year costs once all 50,000 additions are in place (my earlier post).

The OLS calculates that the incremental first year cost of the expansion would be approximately $40-45 million, not $14 million as Corzine claims. Under the best case scenario, NJ's share of this total would be at least $14-16 million, not the $5 million figure included in the FY 2007 budget.

But here's the kicker (quoting the OLS):

"Federal funding is available for NJ FamilyCare (Children) at a 65% matching rate, but federal funds are capped and do not increase with enrollment or expenditures. The State's annual federal allotment is approximately $90 million. However, in past years, the federal government has reallocated unexpended federal funds from other states to support the State's program. The amount of federal funds that have been reallocated from other states to New Jersey has decreased in recent years as other states programs are now expending more of the federal funds that have been allocated for their programs."

"The FY 2006 recommended budget already assumes that over $140 million in unexpended federal funds from other states will be reallocated to New Jersey to support the current program without any increase in the number of children who are enrolled in the program. Thus, if an additional 50,000 children enrolled in the program, the entire cost may have to be paid with State funds if the federal government does not reallocate sufficient unexpended balances from other states to New Jersey."

In other words, due to lack of federal funds, Corzine's program expansion might end up costing New Jersey $40-45 million next year, not $5 million (and at least $67 million per year thereafter). Furthermore, a large portion of federal funding for the current program may also be at risk. NJ taxpayers would then have to absorb a greater share of current program costs as well.

As I said previously, Corzine's idea may be laudable. But let's start with a realistic estimate of program costs and funding sources, and let's identify the spending cuts elsewhere that would make this program affordable on a continuing basis. Otherwise, good intentions and bad math will be a ruinous combination.


At 8:06 PM, Anonymous Bob said...

Nicely reported.

I think it is quite obvious that Corzine did not make hard choices as he stated he did. His prepared budget does not reflect the fiscal trouble the state is in presently.

Given his own party has distanced itself from him, I wonder how he expects to get anything done in this state.


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