Appropriations are authorized for expenditures during the fiscal year and for a period of one month thereafter, and unencumbered appropriations lapse at year end, unless otherwise specified by the Appropriations Act. Non-lapsing balances are considered automatically reappropriated as authorized by statute or by the Appropriations Act.
SIGNIFICANT FINANCIAL POLICIES
A summary of New Jersey’s significant financial management policies is presented below. Where applicable, relevant sections of the Governor's Budget document that contain additional information are noted.
New Jersey’s State Constitution states the following: “No general appropriation law or other law appropriating money for any State purpose shall be enacted if the appropriation contained therein, together with all prior appropriations made for the same fiscal period, shall exceed the total amount of revenue on hand and anticipated which will be available to meet such appropriations during such fiscal period, as certified by the Governor.”
A balanced budget must be established at the start of the fiscal year (July 1) and be maintained at end of the fiscal year. This determination is based on the revenues and expenditures for all funds, the accounting basis for which is Generally Accepted Accounting Principles (GAAP), with the exceptions noted above. In conjunction with the Appropriations Act enacted by the Legislature, the official revenue estimate for the fiscal year is established and certified by the Governor. If the appropriations approved by the Legislature exceed the revenue estimates plus any available surplus, the Governor has the authority and the duty either to veto the entire appropriations bill or to reduce the amount of appropriations to produce a budget that is balanced against the total resources available.
As a matter of policy, the Governor’s Budget seeks to limit appropriations to the amount of annual revenues anticipated for a given fiscal year. For the long term, the goal is to achieve a structural balance between ongoing operating expenditures and revenues for all fund types. However, fund balances may be used to support unforeseen or unpredictable expenditures that require supplemental appropriations. If budget adjustments are necessary to maintain balance during a fiscal year, those actions are typically implemented by the Department of Treasury’s Office of Management and Budget acting at the direction of the State Treasurer and the Office of the Governor.
Cost of State Operations
To help achieve a long-term structural balance between ongoing revenues and spending, the rate of growth in direct services provided by the State should be constrained, both in total appropriations and in its relative portion of the State Budget. The overarching goal is to identify the most efficient way to provide current services or to expand services within the current budgeted resources. This may include staffing reductions across State departments as well as aggressive implementation of management efficiencies and service consolidations.
State Appropriations Limitation (Cap Law)
The State Appropriations Limitation Act (P.L. 1990, c.94), commonly referred to as the CAP law, limits the growth of appropriations in the Direct State Services portion of the Budget, which encompasses the operations of State government. By statute, the maximum appropriation for a given fiscal year is determined by multiplying the base (i.e., current) year appropriation by the average three-year growth rate in per capita personal income calculated on a fiscal year basis. The State may exceed the maximum appropriations if a bill making an appropriation is agreed to by a two-thirds vote of all members of each legislative body. See the Appendix of the Governor's Budget for the specific CAP limitation amount for the upcoming fiscal year.
Surplus Revenue (i.e., Rainy Day) Fund
To prepare for financial contingencies, New Jersey sets aside monies in a restricted reserve fund entitled the Surplus Revenue Fund (i.e., Rainy Day Fund). By law (NJSA C52:9H-14, et seq.), the Surplus Revenue Fund receives 50% of the difference between the amount of revenue certified by the Governor in the annual Appropriations Act for the current fiscal year and the actual collections realized for that year. (Note: income tax revenue is excluded from this calculation.) The balance in this fund, which is reflected within the State’s total undesignated fund balance, may be appropriated upon certification by the Governor that anticipated revenues are less than those certified. Upon a finding by the Legislature that an appropriation from the Surplus Revenue Fund is more prudent fiscally than raising new tax revenue to offset such a revenue decline; or to address emergencies.