While the final payments for some of New Jersey’s largest sources of tax revenue are still being counted, budget forecasts could soon be increased by “hundreds of millions of dollars,” the state treasurer told lawmakers Monday.
Treasurer Elizabeth Maher Muoio delivered that good news on the state’s steadily-improving fiscal outlook during ongoing budget hearings in the runup to the beginning of New Jersey’s new fiscal year on July 1.
“All in all, the revenue outlook for the remainder of the current fiscal year and going into (fiscal year 2022) is positive and improving,” Muoio told members of the Assembly Budget Committee.
But with a little over a month left before a new budget must be enacted, and as another formal budget update is still pending, lawmakers also used Monday’s hearing to press the treasurer and other top officials from Gov. Phil Murphy’s administration for details on other fiscal issues.
Those issues included ongoing business-assistance efforts and the latest planning by the administration to pay down state debt. The state’s current approach to lifting any remaining economic restrictions, such as the continuance of indoor face-covering mandates in New Jersey, was also a hot topic of discussion as some lawmakers suggested it could slow down the state’s fiscal recovery.
Last year, the Murphy administration made a series of grim revenue projections during the worst months of the coronavirus pandemic when much of the economy was largely shut down as a public-health precaution.
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Murphy calling for record spending
But those forecasts have since been revised as many of the economic restrictions have been eased, and as major federal relief efforts have helped to sustain the economy during the ongoing health crisis. Murphy, a first-term Democrat, is now proposing record spending in fiscal year 2022 during what’s expected to be the start of the state’s long-term pandemic recovery.
Also in response to the ongoing health crisis, Murphy and lawmakers agreed to extend some key state tax-filing deadlines by one month this year. They included the deadline for submitting final payments for the state income tax, which is the largest source of revenue for the state budget.
Those payments were due Monday, and they are still being counted by Treasury’s Division of Taxation. That means another big budget revision will be coming early next month, just weeks before lawmakers will have to cement the budget for the 2022 fiscal year.
“In early June, Treasury will release a full set of updated fiscal year 2021 and 2022 revenue forecasts after having time to process the gross income tax payments,” Muoio said.
The treasurer stopped short of providing any specific projections during Monday’s hearing, citing the ongoing counting of the tax payments. But she said her agency is “confident that the overall revenue forecasts will increase by hundreds of millions of dollars due to the federally-induced surge in consumer spending.”
“Our sales tax forecast, for example, is likely to rise by at least several hundred million in FY2021 alone,” she went on to say.
Signs of improving fiscal health
Despite last year’s dire estimates, there were already some recent indications of New Jersey’s steadily improving fiscal circumstances prior to Monday’s hearing. They included formal projections that were released last month by the nonpartisan Office of Legislative Services that forecast revenues would come in about $550 million above the governor’s estimates through June 30, 2022. On Monday, the OLS’ fiscal analysts suggested they would also be revising forecasts upward in response to booming sales and realty tax proceeds.
Murphy and top Democratic legislative leaders also announced earlier this month that they had agreed on a new package of state-funded pandemic relief for New Jersey businesses. The combined $235 million initiative has been proposed as a supplemental General Fund appropriation in fiscal year 2021, another sign of the state’s expanding budget. The legislation needed to enact that initiative is slated to be reviewed by a legislative committee for the first time on Tuesday.
Moreover, New Jersey’s coffers remain bolstered by nearly $4 billion in long-term emergency debt the Murphy administration issued last year when it was still projecting that significant revenue losses would be triggered by the pandemic.
In the wake of the major reversal of fortune — the state is now amassing more than $6 billion in budget reserves based on the latest official forecasts — several lawmakers asked Muoio about any plans the administration has to retire existing debt.
The latest official state debt report indicated New Jersey remains among the nation’s most-indebted states, even before the issuance of last year’s emergency bonds, with more than $44 billion bonded debt, a sum that outpaces the current annual budget.
While plans have not been finalized, Muoio said Treasury is “looking at” upcoming opportunities for debt defeasance. In her opening remarks, she also praised her department for handling a recent refinancing issue that saved taxpayers more than $380 million without adding any term to the debt.
Meanwhile, lawmakers also asked about ongoing efforts to assist New Jersey businesses that have been hit hard by the pandemic. Some $255 million in aid has already been distributed by the state through the Trenton-based Economic Development Authority, said agency chief executive officer Tim Sullivan.
More funding approvals are expected to be announced later this week, he said, and that’s before lawmakers and the governor have enacted the additional $235 million in spending that was announced earlier this month.
‘There’s a lot of good news’
“There’s a lot of good news there,” Sullivan said during the hearing.
But Republicans on the committee raised concerns about the number of businesses that have been forced to close since the onset of the pandemic, citing estimates from state business groups.
Some also raised concerns about Murphy’s unwillingness to adopt a recommendation issued by the federal Centers for Disease Control and Prevention that generally allows for the lifting of indoor mask mandates for individuals who have been fully vaccinated.
Murphy has made it clear that New Jersey is still requiring mandatory mask wearing in all indoor public spaces by both vaccinated and unvaccinated individuals as the mass-vaccination effort continues in New Jersey. On Monday, he also promised to sign an order ending the need for face coverings outdoors, regardless of crowd size, social distancing capacity and vaccination status.
“We’ve been told all along that we’re going to follow the science and the CDC, and when they come out with something that seems like the administration doesn’t like, we don’t follow the science,” said Assemblyman Hal Wirths (R-Sussex) during the hearing.
“The best thing we can do for the state is get people back to work and get them feeling comfortable, and with more of us getting vaccinated, I’m extremely disappointed that the governor isn’t following the CDC guidelines on the masking,” he said.
In response, Muoio said she wouldn’t comment on the specific decision made by the governor and his staff, but added New Jersey is “clearly coming back.”
“I think the state, revenue-wise, as I’ve mentioned, is in a good position and is continuing to improve,” she said.
“We’re going to continue to work with our partners in business and make sure they have the resources they need to continue getting back on their feet and emerging more resilient as we get out of this pandemic,” Muoio said.