Spiraling retiree and health care costs are draining state budgets, including New Jersey's.

Don Farrall, Getty Images

Paul Volcker and other economic experts analyzed the budgets of six states, including New Jersey. They say New Jersey's unfunded retirement liabilities are nearly $85 billion, even after sweeping benefits changes enacted last year.

Volcker and former New York Lt. Gov. Richard Ravitch formed the State Budget Crisis Task Force to examine where state revenues come from and where money is spent. Their report on New Jersey was released Thursday.

The group recommends New Jersey fund its pension system as the law now requires, adopt multi-year budgeting practices and replenish its rainy day fund.

Other state budgets being examined by the group are New York, Virginia, Illinois, Texas and California.