The state treasurer is preparing to deliver good news about surging tax collections to lawmakers later today and also to detail a plan to make the first deposit into the state’s “rainy-day” fund in over a decade.
In an announcement made yesterday ahead of today’s 1 p.m. appearance before the Senate Budget and Appropriations Committee, Treasurer Elizabeth Maher Muoio said more than $250 million will be put into the rainy-day fund thanks to tax collections that have significantly outperformed the original revenue projections for fiscal year 2019.
She is also expected to provide more detail about this year’s “April surprise” surge in tax collections and how that could affect spending in fiscal 2020 when she addresses lawmakers this afternoon.
The rainy-day fund, which is officially called the Surplus Revenue Fund was completely depleted during the Great Recession, and the state has been unable to replenish the account ever since.
NJ in fiscal recovery
Muoio touted the planned deposit yesterday as a sign of the state’s improving fiscal health; the General Fund surplus has also been allowed to grow to over $1 billion during Murphy’s tenure. Once revenue is put into the rainy-day fund it can only be accessed when there is an emergency or major economic downturn. But it also means lawmakers won’t get to recommend ways to spend all of the unexpected revenues on their own priorities, and there are already signs the announcement won’t be too popular with everyone in the State House.
Murphy, a first-term Democrat, offered the initial hints about the state’s improving revenue outlook in the run-up to Muoio’s scheduled appearance before lawmakers by suggesting during a town hall in Ewing last week that the state had a strong April tax collection and was now on track to come out ahead of projections.
The governor went on to say if lawmakers pass his proposal to establish a true millionaire’s tax in New Jersey in fiscal 2020, the expanding tax base could support another $250 million in spending on direct property-tax relief.
But Senate President Steve Sweeney (D-Gloucester) immediately labeled the new budget proposal a “gimmick.” Assembly Speaker Craig Coughlin (D-Middlesex) also followed up by saying middle-class tax relief should be provided “with no strings attached.” Both legislative leaders have also firmly opposed the millionaire’s tax.
No shortfall expected
Still, despite their disagreement over key elements of the fiscal 2020 budget, yesterday’s announcement from Muoio should officially put to rest concerns about the state running a shortfall in fiscal 2019. Those were originally fueled by revenues that were lagging the growth forecast established in the 2019 budget through the first half of the fiscal year. But Treasury officials stood firm to their forecast and actually increased the revenue projection in March. Helping to lead the way was a higher top-end corporate-tax rate pushed by Sweeney that Murphy and lawmakers enacted last July, according to the latest revenue figures released by Treasury.
Yesterday, the announcement from Muoio pointed to tax changes made at both the state and the federal levels as the primary reasons for generating the “higher than anticipated revenues the state is witnessing this fiscal year.” It did not say exactly how much revenues were now exceeding projections in fiscal 2019.
The Surplus Revenue Fund was created by statute in 1990. It calls for 50 percent of any General Fund revenues that come in over the amount originally certified by the governor when the appropriations act was signed to go into the rainy-day account.
According to Treasury, the state last had money in the Surplus Revenue Fund during the 2008 fiscal year, when the balance was $734.7 million. But the fund has been left empty ever since as the state has struggled to meet budget projections on numerous occasions since the recession ended. And even in years when revenues exceeded expectations during former Gov. Chris Christie’s tenure, the additional revenue was used to boost funding for property-tax relief and the public-employee pension system.
Murphy has frequently stressed the need to boost the state’s budget reserves, and even as the General Fund surplus has been increased it still remains a small share of overall spending, which would rise to $38.6 billion under Murphy’s original budget proposal for fiscal 2020.
“Everyone is taught the importance of saving for a rainy day, but unfortunately it has been far too long since New Jersey’s rainy-day fund has seen any deposits,” Muoio said yesterday.
Asked yesterday about the administration’s plan for using the unexpected revenue, Sweeney pointed to several other items that have gone underfunded by the state in recent years. He also questioned the statute that the Murphy administration was pointing to as grounds for socking away at least some of the surge in revenues in fiscal 2019.
“I’m thrilled when the numbers come in good. We’re thrilled about that,” Sweeney said. “But there’s a lot of areas that really require funding that aren’t being funded properly.”