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Welcome To New Jersey: Illinois On The Atlantic

Jul. 03, 2017 6:18 AM ET22 Comments
RawIncome profile picture


  • New Jersey is a wreck financially.
  • It already has extremely high rates of taxation.
  • NJ Muni holders will not fare well.


I recently wrote a piece on Illinois’s debt spiral (located here). In it I discussed the state’s out-of-control pension system, incompetent political leadership, and how to avoid owning the state’s debt.

The State of New Jersey is in a remarkably similar situation. It finds itself completely broke despite proximity to the economic engine of New York City and an extremely high rate of taxation.

The State is rated A3 and has been downgraded 11 times since Governor Chris Christie took office. Future downgrades are virtually guaranteed as the state refuses to reform. (Sound familiar?)

As I write this, the state is entering a shutdown due to its inability to govern itself and pass a budget.

In this piece, I will review the current status of NJ, what to look for in your investments, and some personal predictions regarding the Garden State.

Debt, Pensions, and Out-Migration

The Mercatus Center at George Mason University does a great job of ranking the fiscal condition of US states.

They provide the following snapshot of New Jersey:

(Source: Mercatus)

NJ is ranked #48 among all US states and Puerto Rico.

Debt is high, unfunded pension liabilities are high, and debt-to-state personal income is above the national average.

We can zero in on the pension problem by using data from Bloomberg. According to their calculations, NJ is actually the worst state in the country.

(Source: Bloomberg)

This has resulted in an extremely high rate of taxation (discussed in the next section) and a high rate of domestic out-migration. The only thing keeping the state’s population steady are births and international migration.

(Source: NJ.com)

A recent report shows Millennials are leaving NJ in record numbers:

(Source: NJBIA) (PDF File)

High profile corporations are joining citizens and leaving the state as well. Mercedes-Benz made headlines when they announced

This article was written by

RawIncome profile picture
Individual investor focused on Closed End Funds and other income producing opportunities.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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