New Jersey Makes List of States in Fiscal Peril

Joining California on the list of the 10 most troubled states are: Arizona, Florida, Illinois, Michigan, Nevada, New Jersey, Oregon, Rhode Island and Wisconsin. Pew researchers analyzed the factors that have contributed to California's fiscal woes, then determined which other states were experiencing those same difficulties. Specifically, those challenges include: loss of state revenues; the relative size of budget gaps; increasing joblessness; high foreclosure rates; legal obstacles to balanced budgets, such as a supermajority requirement for tax increases or budget bills; and poor money-management practices.

According to Pew, these budgetary problems can have severe ramifications for those states' residents in the form of higher taxes or fees; layoffs or furloughs of state workers; longer waits for public services; more crowded classrooms; higher college tuition and less support for the poor or unemployed.

Moreover, these states' woes go beyond just their own borders and can impact the nation as a whole. Together, the 10 states account for more than one-third of America's population and economic output. Actions taken by state governments to balance their budgets--such as tax increases and drastic spending cuts--can slow down the country's recovery, says state Pew researchers.

"A challenging mix of economic, political and money-management factors have pushed California to the brink of insolvency," says Susan Urahn, managing director of the Pew Center on the States, in a release. "But while California often takes the spotlight, other states are facing hardships just as daunting. Decisions these states make as they try to navigate the recession will play a role in how quickly the entire nation recovers."

In particular, New Jersey was cited for having persistent shortfalls between what it collects in revenues and what it spends. Also, the collapse of Wall Street--which supports approximately one-third of New Jersey's economy--exacerbates the problem. Growing debt payments and perennially underfunded pension systems will make the Garden State's road to recovery even rougher, writes the report.

New Jersey lawmakers, noted the report, have postponed making long-term fixes to their fiscal imbalances. "In some states, including California, Illinois and New Jersey, lawmakers punted the responsibility--either by asking their voters or governors to make the call, or by borrowing or using accounting methods to put off the hard choices until later," states the report.

GlobeSt.com will follow with reaction by state business leaders to the report.