The bond prospectus noted that “there is the potential that increased usage of recently-granted business tax incentives will limit the growth of Corporate Business Tax collections” in the future, casting doubt on the 6.5 percent growth rate in corporate business tax collections originally projected for the FY15 budget.
The $274.9 million shortfall came painfully close to eating up the Christie administration’s $300 million surplus heading into the FY15 fiscal year on July 1, although state fiscal experts said the administration would most likely cover most, if not all, of the shortfall by making yet-to-be-announced spending cuts in the $32 billion state budget. The administration was forced to borrow $2.7 billion in July -- a higher amount than usual -- to cover short-term cash-flow problems.
The latest end-of-year shortfall, however, raised additional questions about whether the state will soon face yet another mid-year budget crisis, and the recent closures of the Revel and Showboat casinos, the planned closure of Trump Plaza later this month, and the threatened closure of Trump Taj Mahal in November will only add to the state’s budget problems.
The state budget actually anticipates an increase in casino revenues from $229.7 million in FY14 to $270.2 million this year, largely on the basis of an expected increase in Internet gaming revenues that so far has fallen far short of expectations. The Treasury Department acknowledged in its bond prospectus that it did not consider the expected Showboat, Revel and Trump Plaza closures and the recently announced Taj Mahal shutdown in its casino revenue projections, and noted simply that the closures “may impact the growth of casino revenues.”
Economists and state budget officials are divided in their initial assessment of the impact of the five casino closures. While state officials are optimistic that the $2.6 billion in annual casino revenue - down from more than $5 billion in 2006 -- will simply be split among the seven or eight surviving casinos. But casino analysts expect New Jersey’s gaming share to continue to shrink to $2 billion, and the closures could hasten that slide by turning the city’s Boardwalk casino strip into a depressing landscape of blacked-out casinos or empty lots if casino owners decide to tear down the abandoned properties to lower their property tax bills.
James Hughes, dean of Rutgers University’s Edward J. Bloustein School of Planning and Public Policy, said the job losses -- which could top 10,000 if Trump Taj Mahal follows the other four casinos in closing its doors -- are significant for a state that struggles to add 4,000 jobs statewide in a good month.
The economic spinoff will hit businesses throughout the state that supply the casinos that are closing, will hurt local stores and businesses that rely on casino workers as customers, and could drive down home prices and drive up foreclosure rates in the region.
“The Atlantic City region is going to be hit very hard,” Hughes noted. “It’s still a highly seasonal economy, and the unemployment rate is already higher than the state average. A lot of the dealers and upper-level personnel have skills that will be valuable to the new casinos in Pennsylvania and New York, but they will have to move. The real impact is going to be on the people who change the sheets on the beds, who are going to have a hard time finding work.”
Maria Elena Foster, a former Painters Union shop steward at the closed Revel casino who is now working as a community organizer for the union, agreed.
“People who were laid off from Hilton (the closed Atlantic Club casino) are still having a hard time finding work eight months later,” Foster pointed out. “A lot of the jobs that are available are $8-hour jobs with no benefits, and many of the workers who were laid off live in Atlantic City and rely on public transportation to get to work. They have nowhere to go, and their numbers are growing.”