Christie Crows Over Unemployment Drop, Revenue Growth
Jobless rate drops to 8.7 percent, revenues sufficient to avoid further cuts.
Gov. Chris Christie got a double dose of good news this week, as New Jersey's April unemployment rate dipped below 9 percent for the first time in four years and state revenue collections met his Treasury Department's revised targets.
Echoing former President Ronald Reagan, an ebullient Christie declared at a town meeting in Sayreville that "the best social program is a job," and declared that his economic and fiscal policies were responsible for New Jersey's economic, employment, and revenue growth.
“Revenues are up, jobs are up and unemployment is down," Assembly Minority Leader Jon Bramnick (R-Union) declared.
Treasury's announcement that April's revenues came in just ahead of target takes some of the drama out of Monday's Senate Budget Committee face-off between Treasurer Andrew Sidamon-Eristoff and David Rosen, the chief budget officer for the nonpartisan Office of Legislative Services.
The Treasury numbers are good, but not good enough to contemplate restoring the $392 million in property tax rebates that were pushed off from May until August when Sidamon-Eristoff revised his revenue forecasts downward in March.
Whether Treasury eventually hits its lowered $27.075 billion revenue target by June 30 is irrelevant. The next report on the May revenues won't come in until mid-June -- too late for the governor and Legislature to do anything but cover whatever shortfall there is by reducing the state's already low surplus for the upcoming year or lapsing unspent funds from this year's budget, which Christie did aggressively last year.
Property Tax Credit in the Offing?
The real question is whether the combination of a good unemployment report with on-target revenues is enough to persuade the Democrats who control the Legislature to join with Christie to enact a $100 property tax credit on state income taxes for homeowners earning up to $400,000 heading into November's election, when Christie and all 120 members of the Senate and Assembly are up for reelection.
Senate President Stephen Sweeney (D-Gloucester) has said he would like to enact the $183 million first stage of the $1.4 billion property tax credit program he originally proposed last spring, but only if the revenues are there. Christie has offered to identify savings elsewhere in the budget if Democrats are willing to go for the tax cut.
Christie has another option: Treasurer Sidamon-Eristoff could declare sometime in the next six weeks that the revenue figures are so good that he is adjusting his revenue forecast for next year up by enough revenue to cover the cost of the tax cut. Christie, as governor, has the unilateral power to certify final revenue projections. Last year, Democrats set the $183 million aside in a special account to cover a tax cut if Christie's revenues came in on target, but when revenues came up short in the first five months of the fiscal year, that money simply disappeared into the regular surplus.
“As expected, New Jersey has experienced a strong 2013 income tax filing season," Sidamon-Eristoff said in announcing April's revenues. "Moreover, the fact that sales and business income taxes have tracked above budgeted levels in recent months indicates that New Jersey’s diversified economy continues to grow stronger.”
However, Rosen, who predicted last month that Treasury would come in $300 million short of meeting its revised end-of-June revenue target, isn't ready to concede that Treasury will hit its lowered mark.
Rosen issued his own revenue report yesterday in which he noted that gross income tax collections, while up 29.1 percent from $1.731 billion last April to $2,234 billion this April, actually came in $61.26 million short of Treasury's revised budget projections for the month.
He noted that income tax withholding payments from ordinary wage workers actually declined in April, and it is withholding payments that will make up the bulk of the income tax in May and June, because the end-of-year Wall Street and corporate bonuses, capital gains from the 2012 stock market surge, and income shifts to avoid the January 1, 2013, federal fiscal cliff have been counted.
Surge and Cliff
The April surge in income tax payments from wealthy taxpayers has been expected since December, when the impasse over congressional fiscal cliff negotiations led wealthy taxpayers to push income from future years into 2013 to avoid paying the new top income tax rate of 39.6 percent, as well as higher capital gains taxes.
Dr. Charles Steindel, Treasury’s chief economist, acknowledged that "an increase in realizations of taxable income in advance of the federal tax hikes that were enacted in January” was, as expected, a major factor in the April income tax surge. But he noted that an overall improvement in the economy contributed both to the income tax gains and the strong 3.8 percent growth in sales tax collections last month.
The mid-afternoon release of the long-awaited April revenue figures trumped the scheduled morning announcement of the new unemployment figures, which may actually be more significant.
Sen. Barbara Buono (D-Middlesex), the Democratic candidate for governor, dismissed the new numbers, saying that New Jersey still has "an unemployment rate that is a point above the national average, declining wages, and 400,000 people still looking for work." Gordon MacInnes, president of New Jersey Policy Perspective, a liberal think tank, backed Buono's assertion, noting that New Jersey still has not regained tens of thousands of jobs lost in the Great Recession, while New York state has gained all of its jobs back and more.
But Christie administration officials were clearly overjoyed by the latest jobs report.
"The marked decline in unemployment over the last year mainly reflects the ongoing gains in jobs we are experiencing. April saw the largest 12-month gain in the number of employed residents that New Jersey has seen in seven years, with an increase of more than 60,000 compared to April 2012," Steindel said in announcing that the state's unemployment rate had dropped from 9.0 percent to 8.7 percent.
Since January, New Jersey's unemployment rate has dropped 0.8 percent, and the 0.6 percent drop over the last two months is the biggest two-month decline since 1977, he said.
Private sector employment grew by 4,100 jobs, while public sector jobs decreased by 800 for a net gain of 3,300 jobs from March to April. The education and health services sector grew the most, gaining 3,700 jobs, followed by leisure and hospitality (up 2,100 jobs), and the trade, transportation and utilities sector, information technology and financial activities gained 1,400 to 1,700 jobs each. Professional and business services suffered the largest contraction, losing 4,700 jobs, while manufacturing lost 1,200 jobs.
Surprisingly, considering the amount of federal and insurance money pouring into the Shore for Sandy-related reconstruction, construction was down 300 jobs. Construction employment, however, doesn't show up reliably in unemployment statistics because so many contractors are self-employed, one Christie administration official said.