When state lawmakers approved a record-high $58.8 billion annual budget in June, watchdogs warned that they failed to protect New Jersey from a "financial storm" sure to ravage state coffers as federal funding cuts mount.
Now, researchers warn that a literal storm or some other disaster could decimate New Jersey's cash reserves — and threaten other state services — if the federal government follows through on President Donald Trump's vow to shift the burden of disaster recovery to states.
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In a new report this week, Pew Charitable Trusts researchers placed New Jersey among the states most at risk of financial trouble if disaster strikes, given dwindling federal assistance for catastrophes. Researchers listed New Jersey second nationally in federal relief as a share of its reserves, in a ranking of states by their highest single-year federal disaster aid since 2003 (excluding Louisiana and Mississippi, where Hurricane Katrina skewed data).
The current New Jersey budget has a $6.7 billion surplus. The state received the most federal disaster aid since 2003 in 2012, when the feds gave the Garden State $7.6 billion (adjusted for inflation) for Hurricane Sandy relief, according to Pew. If a similar storm hit today and the federal government provided no aid, it would entirely wipe out the state's reserves.
Many states are similarly unprepared to cover the gap slashed federal disaster aid would create, said Colin Foard, a Pew project director and one of the report's authors. State lawmakers scrounging to cover recovery costs that exceed their state's reserves could eyeball other budget items to close the gap, putting an untold number of state services at risk, he added.
"The most catastrophic disasters would exceed or severely deplete state reserves," Foard said. "We found that on average, federal disaster assistance equaled single-digit percentages of total state spending, but in the context of state budgets, even that relatively small amount is equal to important state investments."
While states' reserves hit new records in recent years, states won't have such a cushion going forward, given that federal pandemic assistance has waned, along with record revenue collected in the wake of the pandemic, Foard added.
"These reserves are not meant exclusively for disaster purposes. They're also meant to be states' first line of defense against any unexpected spending or revenue shortfalls, or, for example, economic downturns. So any depletion of reserves for disaster purposes would limit states' ability to use those savings for other purposes," he said.
New Jersey's reserves topped $10 billion in fiscal year 2024, and the current surplus is among the largest in state history. Still, revenue increases in the current state budget aren't expected to cover spending, and budget experts have warned the state faces growing deficits. Experts differ on how long the state's reserves could cover its operations, saying the state has enough to fund anywhere from a month of operations to not even a single day.
Compounding matters is the uncertainty states also face about federal funding beyond disaster aid, Foard added.
New Jersey receives, on average, $506 million a year in federal disaster aid, according to the report. That accounted for just over 0.9% of the state's general fund expenditures last year, putting New Jersey 15th nationally in how big a share federal disaster aid represents of a state's budget, the report says.
The Pew researchers urged federal policymakers, before cutting disaster aid, to consider states' limitations in having savings on hand and the trade-offs states would have to make to cover more of the cost of disasters.
States should more robustly plan and budget for disasters, "as opposed to building the airplane while it's flying," Foard said.
That means states should more comprehensively track and report disaster spending, proactively budget for disaster costs, and invest in risk reduction, he added.
"The thing about disaster assistance as a policy priority for states is that it demands immediate response," Foard said. "If a disaster happens and people are in danger or suffering, the resources need to be there quickly to assist them."
New Jersey legislators have already tried to bolster the state's disaster preparedness, but bills that would establish a $250 million disaster relief grant program and track disaster spending by state and local governments remain stalled in the Statehouse.
Sen. Andrew Zwicker (D-Middlesex) has introduced the bill to track disaster spending every legislative session since 2018. He doesn't expect it will move this session either, considering legislators have just about six weeks or so to wrap up loose legislative ends before the current session ends in January.
Disaster preparedness can be a political football, with the rarity of massive calamities, the many demands on public funds, and developers fighting proposed restrictions intended to minimize storm impacts, Zwicker said.
"We are just too often reactive," he said of disasters.
But the increasing frequency of catastrophic storms that can devastate coastal states like New Jersey, especially, should spur lawmakers to action, Zwicker said. There's even more urgency now, given the disparate impact of federal funding cuts, he added.
"The Trump administration is targeting blue states. Blue states like New Jersey are arguably the most vulnerable state in the Northeast when it comes to a weather-related disaster event in our future," he said.
His bill, in particular, should move, because it merely requires data tracking and "data should be apolitical," he said. Budgeting for disaster preparedness and recovery could be a tougher sell, he conceded, especially if the state's surplus dries up and forces future state leaders to choose between making draconian cuts or raising taxes to cover the state's varied needs.
"Whoever wins this governor's race is going to be handed a very difficult budget. It's only going to get more and more difficult," he said.
New Jersey Monitor is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. New Jersey Monitor maintains editorial independence. Contact Editor Terrence T. McDonald for questions: info@newjerseymonitor.com.