Identifying the Political Economic Tide Shaping Major Public Expenditure Trends in New Jersey During the Last Decade

The paper discusses the annual trends in state expenditure in New Jersey for the period 1993-2003 and presents an analysis of expenditure composition by major program categories and source of funding. In fiscal year 2003, elementary and secondary education and Medicaid were the two single largest components, accounting for more than 40 per cent of total expenditure. Over the decade, transportation and higher education showed the highest average growth rates (about 10 per cent), while public assistance outlays fell by 10.3 per cent per year on average. Considering the source of funding, general funds account for about 65 per cent of state expenditure. Finally, the author tracks the major economic and political events that have taken place between 1993 and 2003 in order to highlight how political developments may have affected expenditure trends. The evidence suggests that Governors not running for re-election show a higher degree of freedom in choosing the level and distribution of expenditure. Several areas for future research are identified, including, studying the impact of non-recurring revenues on state spending and extending the scope of the analysis to include spending by local governments.