New Jersey tax collections continue to trail last year’s despite some continued signs of an improving economic outlook.
The state Department of Treasury’s tax-collection report for September indicates total monthly revenues from the state’s major tax sources were down by a little more than 4% compared to the same month last year.
The poor monthly revenue performance, reported by Treasury on Thursday, comes as New Jersey continues to deal with the ongoing coronavirus pandemic, and as public-health restrictions ordered by Gov. Phil Murphy continue to affect economic activity across the state.
But the September performance was a slight improvement compared to the prior month; August revenues were down year-over-year by nearly 6%. September was also the second straight month in which the haul from the sales tax beat the prior year’s monthly total even though overall revenues lagged.
Meanwhile, new jobs figures released by the Department of Labor and Workforce Development on Thursday showed the state has now recovered 56% of the jobs lost earlier this year during the worst months of the pandemic. The state unemployment rate also fell by more than 4 percentage points, to 6.7%, in September, according to the new data.
This year, Treasury’s monthly revenue figures are being monitored more closely than ever as Murphy and lawmakers have had to reset spending projections, and even realign the state’s fiscal year in response to the pandemic and revenue losses it has triggered.
Getting ready to borrow billions
The revenue figures are also a key issue for the governor and fellow Democrats who control the Legislature as the state gets ready to borrow as much as $4.5 billion without voter approval to help fund the annual budget amid the health crisis.
The sales tax, the second largest source of tax revenue for the state budget, has been a particular source of concern and it experienced significant losses earlier this year as many businesses were forced temporarily to shut down across the state.
But total monthly sales-tax collections were up by nearly 3% in August compared to the same month last year. And they remained up, by 1.3%, in September compared to the same month last year.
Treasury also recorded a modest year-over-year uptick of nearly 2% for income tax, the largest source of tax revenue for the budget, in September. But officials cautioned that last month’s income-tax collection totals were likely artificially boosted by the schedule followed by employers for paying withholdings to the state.
“This September had five weekly employer withholding payments whereas last September only had four,” the officials said.
Accounting for the difference would knock down the year-over-year monthly collections by roughly 8%, they said.
Tax revenue from businesses also down
Revenue from the corporate-business tax, another significant tax source for the budget, was down by 11.2% in September compared to the same month last year, according to Treasury.
Before the pandemic struck, overall state tax collections had been running ahead of last year’s pace and Treasury officials had upgraded their revenue forecasts as late as February.
But the outlook deteriorated markedly starting in April as much of the state was shut down to try to slow the rate of new COVID-19 infections.
Because of the health crisis, Murphy and lawmakers delayed the start of the 2021 fiscal year, from July 1 to Oct. 1. And Murphy late last month signed into law a $32.7 billion budget that will cover state spending for a nine-month period that ends on June 30, 2021.
Treasury has already baked revenue losses into its long-term forecasts as the pandemic is expected to persist well into next year, and Treasury officials say they don’t expect growth to resume again until next spring and summer.
Overall tax collections for what would be the first quarter of a traditional fiscal year 2021 — July, August and September of 2020 — remained off by nearly 9% compared to last year’s total for the same period, according to Treasury.
But over the last five months, the state has gained back 467,600 jobs, according to the new unemployment data, and New Jersey’s 6.7% unemployment rate has now dropped below the national rate of 7.9%. That good news was tempered somewhat by a drop in the labor-force participation rate, which measures the size of the state’s overall workforce.