Money Left Over Near End of Budget Year Can Add up to Serious Chunk of Change

Christie administration is culling so-called ‘lapses’ -- funds allocated to programs and departments that aren’t spent within the fiscal year

The state is saving $343 million over the past few months of the fiscal year through what it’s calling routine belt-tightening, with a dozen departments now determining that final costs for some programs are going to fall short of what was originally budgeted.

The spending reductions that fall under the technical term “lapse” were first outlined during a late February budget briefing by state Treasurer Andrew Sidamon-Eristoff, but his department did not provide a full list of impacted departments and programs at the time.

According to a list since obtained by NJ Spotlight, the lapses projected for the $32.8 billion budget for the current fiscal year, which runs through June 30, will affect 12 different departments, a number of interdepartmental accounts, and the New Jersey State Parole Board.

The Department of Treasury itself is producing the most savings, with $79.5 million coming primarily from trends in participation and various program surpluses. For example, the department is planning to save $7 million from the Homestead property-tax relief program, which has experienced a decline in participation in recent years, and nearly $5 million from unused Highlands region protection funds.

The Department of Human Services is next highest, generating $74.5 million in savings. Some of the projected savings are coming from programs that help the homeless and those with substance-abuse problems.

Other notable programs that will deliver savings include a $40.6 million projection under the Department of Education’s line item for teachers’ post-retirement medical, and a combined $7.5 million surplus in the Department of Community Affairs’ municipal-aid programs, including transitional aid for towns and cities facing financial challenges.

Although the belt-tightening does reduce the bottom line, Treasury officials in the past have bristled at portraying the lapses as simple spending cuts. Instead, they say they are the product of prudent oversight.

“Every Administration identifies lapses and revenue adjustments at this point in the year as a tenet of responsible budget management,” Treasury spokesman Christopher Santarelli said yesterday.

“This lapse list recognizes the difference between actual costs from line items in the budget and what we project the final costs for these items to be at fiscal year’s end,” he said.
For example, he said the spending on social services for the homeless, the source of a $1.5 million lapse, results from appropriations in that area that were “liberally constructed to ensure adequate funding to meet the service needs of this vulnerable population.”

“It is common every year for more funds to be appropriated than needed to pay for various program demands,” Santarelli said.

[related]A surplus in the transitional aid program for municipalities stems from “accounting for the actual aid award amounts.”

“Transitional Aid is provided to meet needs, which can end up accounting for less than what is budgeted,” he explained.

But Jeff Tittel, director of New Jersey’s Sierra Club, accused the Christie administration of manipulating some programs to realize the savings, such as this year’s unused Highlands protection funds. Not spending the money compromises open-space preservation efforts and water-quality protection in the environmentally sensitive Highlands region of northwest New Jersey, he said.
“The Highlands money is important and should have been spent,” Tittel said.

Santarelli declined comment yesterday when offered a chance to respond to Tittel’s criticism.

At $343 million, the lapses were first discussed during a February 24 budget briefing. The treasurer also said during the briefing that the revenue forecast for the current fiscal year was lowered by about $60 million and he reported $288 million in supplemental spending needs.
Given those budget adjustments, the lapses help preserve the roughly $300 million surplus fund included in the current fiscal year budget as a cushion against unforeseen spending needs or revenue gaps. And the $33.8 billion spending plan Christie has proposed for the fiscal year that begins July 1 will open with a projected $388 million surplus.

David Rosen, the longtime budget analyst for the non-partisan Office of Legislative Services, told lawmakers last week during budget committee hearings that New Jersey’s surplus fund the last several years has equaled about 1 percent of the state’s annual spending.
“Revenue forecasting errors nationally average above 3 percent, yet New Jersey has been operating with a budget cushion of about 1 percent,” Rosen said.

He also pointed to a recent Pew Charitable Trusts analysis of individual state budget reserves that ranked New Jersey 47th among states when it comes to how long each government could function on its reserves.

Yet in some ways, the routine scrubbing of the budget for savings by the Christie administration has also helped to buttress the surplus fund as recent fiscal years have unfolded. Last year, the administration found nearly $700 million in savings through another series of midyear lapses that Treasury officials said had no actual impact on programs.

But there have also been times when the budgeted surplus and the lapses have not provided enough of a cushion to offset some of the larger budget gaps that have opened up in recent years as Christie’s spending plans have failed to live up to revenue estimates.

Last year, Christie was forced to cut nearly $900 million from the planned payment into the public-employee pension system to help close a roughly $1 billion shortfall that was detected only after April income tax returns were counted. Property tax relief has also been delayed at times – there were no Homestead relief payments at all in 2014 — to ease budget gaps.

And this year, Christie and lawmakers are still waiting to see how a lawsuit filed by public-worker unions will play out after the pension payment for the current fiscal year was reduced by nearly $1.6 billion — far more than the surplus and lapses could cover. The state Supreme Court has taken over the case and has scheduled arguments for May 6.