New Jersey, in only 20 years, has gone from being a financial powerhouse, characterized by strong job growth and consistent budget surpluses, to having one of the largest structural deficits of any state in the country. As noted on the chart below, the State's bond rating has been in steady decline since 1992, when it last held triple A status. New Jersey is one of only 9 states whose bond ratings have been downgraded by Moody's Investors Service since the recession of 2001 and have not recovered. (Atzert, 2006)
This chart, taken from the 2006 Budget-in-Brief shows the decline of New Jersey's credit rating.
There are some clear reasons for this problem the state of New Jersey finds itself in. A big problem is the fully funded and over-funded pensions of the past. The three largest pension funds in New Jersey are The Teacher's Pension Annuity Fund, Public Employee Retirement Fund, and Police Fireman Retirement System. Just going back a few years, these pension funds were "over or well funded." ("New Jersey", 2006)
Many state employees are also able to save sick and vacation days and be compensated for them at the end of their employment. This may not seem to be something that will make a huge difference in the budget, but it is a few dollars that can be moved to more needed programs. A suggestion made by Paul Nelson in his blog on the NJ Fiscal Folly web-site is,
The practice of "banking" unused vacations and sick days should be legally terminated for all state and local government jobs. Failing that, the payouts should be capped at some minimal level...