The New Jersey State Budget: Some Context, Please?

Jun 25, 2011

The word for today is context. Yesterday’s New York Times ran a story about a bill in the New Jersey state legislature about to become law, which will reduce the state’s cost of benefits for government employees and retirees. The fiscal condition of the states is a burning issue nationwide, and deserves a clear and concise airing for interested citizens.

I’ll focus on one sentence, which states that the law “will save local and state governments $132 billion over the next 30 years. . .” Now, what does that mean? Is that a lot? Why is 30 years a meaningful period of time? Numbers are often important, but presenting them to people is meaningless unless you provide some context as well.

This statement has little meaning because the story provides no context for it. Instead, let’s look at it this way: (1) the $132 billion averages out to $4.4 billion per year, a time period we can relate to intuitively; and (2), the total New Jersey state budget is currently running about $30 billion per year. Now we’re getting somewhere – the annual average savings from this bill are about 15% of the state budget. But here are some things we still don’t know:

  • How do the savings trend over time? Is it a level $4.4 billion over the whole 30 years? Or does it start at a “paltry” $200 million in year 1 and ramp up gracefully to, say, $9.2 billion by year 30? 
  • The $30 billion budget I cited is the state budget – it does not include municipal, county, and other local budgets. How does that change the arithmetic? 

The reporter was no doubt simply quoting some government official. But nowhere in a rather lengthy story was there anything to help the reader get some context for this very important fiscal information. A little legwork, and a few extra sentences, would have added some crucial context to an otherwise excellent story.

Citing numbers over nonstandard time periods is at best confusing, and at worst intellectually dishonest or even downright deceptive. I’ve written posts before about numbers devoid of context, and will keep writing about it because the fix is so simple: reporters who demand coherent, meaningful data from their sources, and failing that, who research and provide their own context.

“Painting with Numbers” is my effort to get people talking about financial statements and other numbers in ways that we can all understand. I welcome your interest and your feedback.

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