A bill proponents say would improve the accuracy of state revenue forecasts and align New Jersey with practices in a majority of states has reemerged in the lame-duck legislative session and could now make it to Gov. Phil Murphy’s desk by the end of the year.
The measure would establish a “Revenue Advisory Board” that would formulate official tax-collection forecasts for the annual budget in the runup to the next fiscal year.
Getting revenue forecasts right is critical for policymakers in Trenton, since big misses can bring on last-minute spending cuts, tax hikes or other budget changes that can hit taxpayers hard. In past years, the state has delayed the payment of property-tax rebates and raided funds earmarked for the state pension system to paper over major forecast misses.
The proposed Revenue Advisory Board would bring together representatives from both executive and legislative branches, as well as a third, independent member with relevant budgeting experience, to generate consensus forecasts.
Proponents, including Senate President Steve Sweeney (D-Gloucester), argue the change is needed to make revenue forecasting — a process now heavily dominated by the executive branch — more accurate by making it more collaborative. If approved, the measure would also put New Jersey more in line with the forecasting policies of 29 other states, according to the Volcker Alliance, a nonpartisan organization that promotes sustainable state-budgeting practices.
But a prior version of the bill was vetoed by Gov. Chris Christie in early 2016, and it’s unclear right now whether Murphy, a first-term Democrat, will follow in the footsteps of his Republican predecessor, who saw it as an intrusion on executive-branch authority.
The newly fast-tracked push to enact the consensus-forecasting measure also comes against the backdrop of an ongoing contentious relationship between Murphy and Sweeney. The two Democratic leaders have sparred on numerous matters since Murphy took office in early 2018, in particular budgetary issues.
Roles defined in constitution
For seven decades, New Jersey’s annual budget has come together the same way. The state constitution gives lawmakers the power to write the annual appropriations bill, but awards to the governor the sole authority to certify how much tax revenue will be available during the fiscal year to support projected spending. The state constitution also requires a balanced annual budget, meaning projected revenues must match forecasted spending when a new fiscal year begins on July 1.
As part of the process, the Department of Treasury compiles a short fiscal outlook and revenue forecast each winter. The state treasurer then comes before lawmakers twice each spring to review the forecast and report on any necessary changes, based on tax-collection trends. A revenue forecast is also prepared each year by the budget analyst for the Office of Legislative Services, the state Legislature’s nonpartisan research arm, but it’s advisory in nature.
At times, the competing forecasts have produced political tension in the State House. For example, Christie once publicly derided the OLS budget analyst after his office produced a revenue forecast that wasn’t as optimistic as the state treasurer’s, thus undermining Christie’s call for a tax cut.
In theory, by establishing a consensus forecasting model, the executive and legislative branches would be forced to collaborate from the outset, with the third, independent member on hand to help foster a compromise if needed. In addition, the three-member board would be required to hold at least one public meeting where testimony on the state’s economic conditions would be received from experts and members of the public.
The panel would also be required to adopt an official advisory forecast by Jan. 15 of each year, with revisions or updates due by May 15. It would also compel the governor in the annual budget message to explain any divergence from the advisory board’s forecast.
Importantly, the proposed legislation would preserve the official certification of revenues as a constitutional duty of solely the executive branch. That means this version of the bill stops short of a proposal floated last year by Sweeney that sought to amend the constitution to strip the governor of that responsibility after a budget dispute with Murphy nearly caused a government shutdown. But Sweeney’s proposal, which Murphy opposed, never picked up support in the Assembly.
Introduced in early 2018, the bill that would establish the Revenue Advisory Board as a matter of law instead of as a constitutional amendment hadn’t moved for nearly a year. But Thursday it was posted for a vote in the Senate Budget and Appropriations Committee, and cleared unanimously.
Speaking about the bill Thursday, Sweeney pitched it as a “compromise.” He also cited the Volcker Alliance, which endorses the consensus-forecasting model, and has consistently given New Jersey a “D” grade on budget forecasting in its annual evaluations of state fiscal policies.
“This is a fair compromise and hopefully the administration will look at it as a compromise,” Sweeney said.
Senate Budget and Appropriations Committee Chair Paul Sarlo (D-Bergen) also suggested the proposed board would “streamline” the current forecasting process, which can be time-consuming for lawmakers when the revenue projections don’t line up.
“This will hopefully help our budget process,” Sarlo said. “We spend a lot of time trying to decipher the revenue (projections) on both sides.”
The bill is now on course to go before the full Senate before the end of the year, and since it has already cleared the full Assembly, that vote would send it to Murphy.
While the administration did not weigh in on the measure’s advancement yesterday, it may be difficult for Murphy to oppose the bill. State Treasurer Elizabeth Maher Muoio sponsored a similar measure when she was serving in the Assembly several years ago during Christie’s tenure.