Gov. Chris Christie’s administration has officially closed the books on one of its most tumultuous budget years.
The state earlier this week released the comprehensive financial audit for the 2014 fiscal year, which saw the administration struggle with a $1 billion budget shortfall and a court challenge of its plan to remedy the gap before the fiscal year ended back on June 30.
Lawmakers last month complained that the audit was not yet available for review, saying it would make it harder for them to evaluate the $33.8 billion spending plan Christie has proposed for the next fiscal year, which begins July 1.
They were also upset that a complete list of spending adjustments — known as “lapses” — for the current fiscal year had not yet been released by the state Department of Treasury. The list has since been provided to legislative staffers, and a copy obtained by NJ Spotlight revealed $343 million in budget adjustments impacting 12 different departments.
The 2014 fiscal year audit showed tax collections mostly adhered to revised estimates Treasury released last May.
Audited income-tax collections totaled $12.3 billion, topping Treasury’s revised estimate of $12.05 billion. Audited sales-tax collections were $8.8 billion, which also beat the May estimate of $8.6 billion. The audited collections for the corporate business tax totaled $2.1 billion, slightly below the revised estimate of $2.4 billion.
In all, tax collections during the 2014 fiscal year topped revenues from the prior fiscal year by $500 million, according to the audit, meaning the state enjoyed some modest economic growth despite the budget challenges.
“The State’s three major taxes comprised 80.6 percent of the total general taxes that were collected during Fiscal Year 2014,” the audit said. “The State’s economy showed a slight improvement, as indicated by the $0.5 billion increase in general taxes when compared to Fiscal Year 2013.”
Ideally, the audit for the prior fiscal year is released before lawmakers start to go over the administration’s latest proposed budget, which Christie put forward on Feb. 24 of this year.
But that doesn’t always happen.
According to Treasury records, the audit has been released before February in five out of the last 10 fiscal years. But this year marks only the second time over the last decade that the audit of the prior fiscal year has been released by the administration in April. The last time that happened was in 2009, according to the records.
The delay was largely caused by a switch to new accounting standards, which involved taking a close look at data provided by more than a 100 local governments and school districts.
And despite the modest economic growth documented by the latest audit, that wasn’t enough to get Christie’s$33 billion budget through the year without any changes. Instead, the administration was forced to make several adjustments during the fiscal year after its initial revenue projections fell short.
Nearly $700 million in spending reductions occurred through mid-year “lapses,” savings realized after the administration lowered its revenue projections by $250 million. A roughly $1 billion shortfall then opened up in the final months of the last fiscal year, forcing a number of last-minute fixes, including the decision to reduce by nearly $900 million a planned $1.58 billion payment into the public-employee pension system.
Christie said the shortfall was tied to federal tax-policy changes enacted by the Obama administration for the 2013 tax year — namely, higher rates for the wealthy.
Public-worker unions took Christie, a Republican, to court over the reduced pension payment, saying it violated a 2011 pension-reform law he signed after working with Democratic legislative leaders in an effort to fix a pension system that has suffered from years of underfunding by Christie and prior governors from both parties.
The 2011 law, which also called for increased employee-pension contributions, sought to establish as a contractual right of the workers a series of increased state payments into the pension fund over a seven-year period that began in 2012.
A Superior Court judge ruled late last June that Christie could make the reduced pension contribution only because the state was in the middle of a fiscal emergency, and because the state constitution prohibits deficit spending.
But the fight over the 2011 law continued into the current fiscal year after Christie also reduced a planned $2.25 billion pension payment down to $681 million, saying the state couldn’t afford the larger payment and that tax increases sought by Democrats would be bad for the state’s economy.