Slight Hike in Tax Revenue Adds Up to Projected Surplus for State Coffers
But slight budget cushion forecast for first six months of fiscal year may not be enough to justify dropping state’s estate tax
Gov. Chris Christie is scheduled to present his next state budget to lawmakers in less than two weeks. And it looks like he’ll be able to deliver that address feeling some confidence about how his spending plan for the current fiscal year is holding up.
A NJ Spotlight analysis of revenue figures released by the state Department of Treasury for the first six months of the current fiscal year indicates tax collections were running a modest $56.3 million ahead of the 3.4 percent growth rate that Christie has projected for the full fiscal year.
Though not as impressive as the $180 million revenue surplus that was measured after the first six months of the previous fiscal year, the cushion does put the state in a much better position than it’s been in during some other recent fiscal years, when large revenue shortfalls brought on midyear spending cuts.
New Jersey is also better off right now than states like Alaska, Oklahoma, and several others that rely heavily on tax revenues tied to the oil, natural gas, and mining industries. But there remains some concern among economic analysts about weakening stock-market conditions that could impact income-tax collections in states like New Jersey during the second half of the fiscal year.
From a political perspective, with only a modest surplus in New Jersey tax collections at the halfway mark of the current fiscal year, Christie could have a tough time making a strong case to lawmakers that New Jersey can afford tothis year.
Getting rid of that tax was one of the primary goals for 2016 that Christie laid out last month in his. Christie’s budget address is scheduled for Feb. 16.
The state’s fiscal year runs from July 1 to June 30, with Dec. 31 as the midway point. The current state budget totals $33.8 billion.
Treasury reported last month that at the midway point of the current fiscal year the state had collected $11.8 billion from 16 major revenue sources. That marked a nearly 4 percent improvement over tax collections during the same period for the last fiscal year. And it beat by roughly .5 percent the growth rate that Christie is expecting for the full 2016 fiscal year.
Now at $56.3 million, the revenue surplus is down slightly from theTreasury disclosed in response to a public-records request submitted after the first three months of the current fiscal year.
Treasury officials declined comment on NJ Spotlight’s analysis yesterday.
But continuing to have a revenue surplus through the first six months of the current fiscal year is good news for a state that has struggled to fully recover from the last recession, and for a Christie administration that has had to contend with sizable revenue shortfalls midway through some prior fiscal years.
For example, at the halfway mark of the 2014 fiscal year, tax collections were $331.7 million behind Christie’s revenue projections. The shortfall was even larger the year before, totaling $426 million. And after the first six months of the 2012 fiscal year there was a $325.7 million shortfall.
Since the state constitution requires a balanced budget, midyear revenue shortfalls typically require the administration to cut spending or make other budget adjustments. In recent years, Christie has delayed property tax relief payments and reduced planned payments into the public-employee pension system to keep from running a deficit.
This time around, New Jersey is not one of several states currently struggling with a big mid-year revenue shortfall. According to the Nelson A. Rockefeller Institute of Government, a sharp drop in oil prices has hit tax collections in Alaska, Louisiana, New Mexico, North Dakota, Oklahoma, Texas, West Virginia and WyomingThere are, however, still some concerns for other states for the remaining months of the 2016 fiscal year, Rockefeller analysts Lucy Dadayan and Donald Boyd wrote in a recent “By the Numbers” brief.
They projected weak growth in income and sales taxes thanks to developments in the financial and real-estate markets, among other factors.
“Most states anticipate considerable downward pressure over the long-term revenue forecast horizon,” the Rockefeller analysts wrote. “The overall picture is of continued but sluggish growth in fiscal years 2016 and 2017 and continued fiscal challenges and uncertainties for the states.”
That forecast could mean Christie will have a harder time getting support from lawmakers to repeal New Jersey’s estate tax, which brings in an estimated $375 million to $400 million each year.
Christie and others who support repealing the estate tax repeal argue it would ultimately help the state budget by keeping high-income residents from leaving New Jersey for states with less aggressive tax policies. But it’s unclear right how the state would make up for the short-term loss of revenue, especially during a period of slow overall revenue growth.
In his 2012 State of the State address, Christie also called for a 10 percent across-the-board reduction in the state income tax. But lawmakers, wary at the time because state tax collections were falling short of Christie’s revenue targets, never approved it.