Compounding the problem is a $165 million shortfall in the final FY13 tax collections that the Treasury Department finally confirmed last week when it issued its end-of-year audit two months late.
Finally, as New Jersey Policy Perspective, the severe winter is expected to add $70 million to $80 million to current year snow removal costs; another $20 million is needed for tort claims; and the New Jersey Sports and Exposition Authority, which hosted the Super Bowl earlier this month, needs another $25 million to $30 million infusion.
State revenues were running relatively close to projections through November, and Treasury officials did not know until early January that a disastrous December had knocked what was then a $330 million hole in the current year budget. Treasury undoubtedly has taken steps to cut or freeze unnecessary spending in the next month.
But with the state facing an $800 million current year shortfall including the snow removal and other unexpected spending needs, Christie will still need to identify one or more major fund raids or one-shot budget savings to show the Legislature it can make up the difference. The problem for the Christie administration is that it may have already used the easy, large-scale budget gimmicks
The biggest – and most controversial – would be to shift a portion of this year’s required $1.7 billion pension payment, which is not expected to be made until just before the June 30 end of the current fiscal year, into the following year’s budget – a fiscal gimmick similar to the $392 million homestead rebate shift the Christie administration made to balance its FY13 budget this time last year.
Sidamon-Eristoff, who argued that homeowners would not suffer terribly by the three-month delay in the receipt of property tax relief, could argue similarly that giving up two months of investment earnings by putting $600 million, for example, into the pension fund later than planned would cost the pension funds no more than $12 million or so, and would enable the state to cover its present budget shortfall.
It may have been that budget maneuver -- not a desire to avoid paying next year’s $2.4 billion pension payment -- that Christie was signaling with hiscrowding out other vital state needs. Christie said earlier this month that he would , but he did not say anything about when this year’s bill would be paid.
While Sweeney, in particular, would be inclined to regard a partial shift of this year’s pension payment into next year’s budget as a personal betrayal by Christie, the governor can include the proposal -- or similar options -- in his Budget Address tomorrow and challenge the Democratic-controlled Legislature to come up with a better idea.
“The governor won reelection, he gets to go first, and the legislature gets to react,” the fiscal policy expert noted. “We all know that at the end of the day, the governor gets 98 percent of what he wants because the alternatives are usually worse. I don’t see how he doesn’t go for a tax cut. First of all, assuming he can figure out a way to get through FY14, the money is going to be there. This might be the easiest budget in 10 years. What do the Democrats do?”
State revenue growth of 6.5 percent – which is less than Christie is likely to project – would generate almost $2.1 billion next year on the $32.3 billion in revenues that would be collected this year if the state closes the budget year with the current $400 million shortfall in the 16 largest taxes and a $135 million hole in expected Internet gaming revenue.
Christie can also expect to reap an estimated $450 million in Medicaid savings from a full year under the Affordable Care Act -- a $225 million increase over the six-month savings in the FY14 budget.
That more than $2.3 billion in revenue growth and Medicaid savings would readily cover the $700 million increase in pension costs from $1.7 billion to $2.4 billion; any pension payments or other FY14 bills that get pushed into FY15; the $250 million in bond premiums for the Transportation Trust Fund that will not be available this year; the $77 million fourth-year additional cost of Christie’s original business tax cuts, and other built-in costs.
Christie would still have enough money left over to provide significant increases in state aid to K-12 schools and higher education -- as well as enough for a $250 million down payment for the first year of Sweeney’s property tax credit on state income tax bills and a restoration of the 25 percent cut in the Earned Income Tax Credit for the working poor that was a casualty of the FY11 budget cuts.