Another Budget Adjustment -- State Tax Collection Forecast off by $60M
Administration’s overestimate brings midyear spending reductions to $343M -- and there’s still a $1.6B budget bullet out there
- Credit: Governor's Office/Tim Larsen
While much of the attention this week has been on Gov. Chris Christie’s budget plan and his latest public employee benefits-reform proposal, subtle changes to the current state budget made earlier in the week went largely unnoticed.
Among those changes was a lowering of the state’s revenue forecast for the spending plan in place until June 30. State tax collections are now expected to come in nearly $60 million below the amount Christie projected when he signed a $32.5 billion spending plan into law in June.
For Christie, a Republican considering a run for president, it’s the latest scaling back of a revenue forecast that topped $34 billion when he rolled it out around this time last year.
Overestimating revenue collections is a problem that has dogged Christie for several years since taking office in early 2010, bringing on a series of on-the-fly changes, impacting property-tax relief, affordable housing funds, and the state contribution into the public-employee pension system, among other things. He was also forced to cut aid for education and many other state departments shortly after taking office amid recession and as the budget he inherited from former Gov. Jon Corzine came up more than $2 billion short.
But this latest reduction is modest compared to prior years, including this time last year when the revenue forecast was trimmed by $250 million. And the latest information on tax collections from the Office of Legislative Services, the nonpartisan research arm of the state Legislature, also indicates the current revenue forecast is largely holding.
“Through the end of January, the major revenues are growing by 5.5 percent, nearly matching the year-end aggregate target-growth rate,” the OLS report said. “Of the 14 major revenues OLS tracks each month, three are growing above the respective certified year-end target growth rates and 12 are growing below the target rates.”
Still, along with this year’s revenue forecast downgrade and $288 million in new spending needs identified since Christie signed the current budget into law, there will be $343 million in lapses, state Treasurer Andrew Sidamon-Eristoff said during a briefing with reporters Tuesday. The briefing was held just before Christie put forward to a joint session of the Legislature his proposed $33.8 billion budget for the 2016 fiscal year, which begins July 1. The treasurer did not identify the individual lapses on Tuesday.
The state Department of Treasury uses the term lapse as a catchall for midyear spending reductions. It can simply mean the state has learned it won’t need to spend as much on an item as it once forecast, or a lapse can also be used to help close revenue shortfalls. Delayed property tax relief and cuts in contributions to the state pension have technically been recorded as lapses in recent years.
Right now, it’s not clear whether the lapses will have little impact, or carry more meaningful consequences, such as the delayed property-tax relief, which affected roughly 695,000 New Jersey residents last year, including seniors and low- and moderate-income homeowners.
Jeff Tittel, director of the New Jersey Sierra Club, said even minor lapses can have an impact on programs and efficiency. Last year’s lapses included $15 million in New Jersey Transit funding and $4 million from the Highlands Protection Fund.
“They’re going to grab any penny that isn’t nailed down,” Tittel warned. “Some programs still have things that need to get done.”
Treasury spokesman Christopher Santarelli said yesterday the list of the $343 million in lapses is still not available.
A list of the $288 million in new spending needs identified since Christie signed the current budget into law was also not ready to be released, he said.
Lastly, budget documents indicate the state is planning to maintain a $388 million surplus by the time the current fiscal year ends, up from the $304 million that it started with on July 1.
Those adjustments leave the budget for the current fiscal year at $32.8 billion. But that doesn’t take into account. Superior Court Judge Mary Jacobson, in her decision, said Christie and lawmakers must work together to come up with another nearly $1.6 billion to honor a $2.25 billion commitment that the state made in benefits-reform measures signed into law by Christie in 2010 and 2011.
The current budget has only $681 million allocated for the pension system, which covers the retirements of roughly 773,000 current and retired employees.
Christie has proposed along with his new budget a new benefits-reform plan that would freeze the current pension system and push workers into a hybrid retirement plan with some features of a defined-contribution system like a 401(k).
Christie’s plan also relies on forcing public workers to accept less-generous health plans to generate savings that could be used to pay off the current pension system’s debt, which ranges between $37 billion and $83 billion depending on which accounting system is used.
Christie said he’s planning to appeal Jacobson’s ruling, and Sidamon-Eristoff in Tuesday’s briefing declined to offer specifics when asked what would happen if the pension ruling holds, calling it “a hypothetical.”
Wall Street credit rating agency Moody's Investors Service cited the court ruling as a "credit negative" for New Jersey yesterday.
Christie, pressed on the budget issue yesterday byin Maryland, said his administration would make cuts if need be.
“What we’ll do is what I’ve done before,” Christie said. “We’ll cut spending if we have to.”