New Jersey is on track to close its fiscal year in a few weeks with a windfall of more than $3 billion, according to a new forecast from the nonpartisan Office of Legislative Services obtained by NJ Spotlight News.
The latest OLS forecasts also bode well for the fiscal year that begins July 1. Analysts are predicting revenues to be more than $1 billion over the totals they last provided in April, according to estimates due to be released publicly on Wednesday.
There’s now less than a month left before Gov. Phil Murphy and lawmakers have to reach agreement on a budget for the 2022 fiscal year, and it’s unclear how closely the latest OLS estimates will match up with those being compiled by the Murphy administration, which are also expected to be released Wednesday.
Also unclear is what the administration and lawmakers may decide to do with the major revenue windfall that OLS is now forecasting.
State Treasurer Elizabeth Maher Muoio and the OLS analysts were supposed to discuss the revenue update Wednesday at a much-anticipated Assembly Budget Committee hearing. That was to give lawmakers an opportunity to publicly pore through the latest budget forecasts. But the hearing was canceled at the last minute Tuesday.
GOP cries foul
Kevin McArdle, a spokesman for Assembly Speaker Craig Coughlin (D-Middlesex), did not immediately say why Wednesday’s hearings with the treasurer and OLS were canceled when reached for comment. Republicans complained that it robs lawmakers of an opportunity to quiz administration officials about the latest figures.
“It’s very disappointing that we can’t question the treasurer directly,” said Assemblyman Hal Wirths (R-Sussex) in an interview after he learned the hearings were off.
“I don’t know if they have something to hide or what they’re afraid of,” Wirths said.
Earlier this year, the OLS analysts issued a forecast that added about $430 million to updated revenue estimates the Murphy administration had issued in February for the current fiscal year, which closes June 30.
The initial OLS forecast was issued after the administration significantly upgraded its own revenue estimates. Last year the administration estimated the state would suffer severe revenue losses due to the coronavirus pandemic that have not materialized.
High income-tax receipts
The Murphy administration issued nearly $4 billion in long-term debt without voter approval to prop up the annual budget in response to its initial forecasts, a decision that has since been widely questioned.
The latest revenue estimates produced by the OLS increase the total forecast for the current fiscal year by $3.3 billion over OLS’s April numbers. Among the factors OLS identified in an email sent to lawmakers Tuesday on budget committees in both houses were “extremely large tax payments that the state has received in the past three months.”
Earlier this year, Murphy, a first-term Democrat seeking reelection this year, extended the state’s traditional mid-April income-tax filing deadline by one month in response to concerns about the pandemic.
The income tax is the state’s largest source of revenue and, as a result of the extension, Muoio was unable to provide a detailed revenue update based on the most up-to-date figures when she appeared before the budget committees in late May. But she told lawmakers at the time that she expected forecasts for both the current fiscal year and 2022 to be increased by “hundreds of millions” in June.
The OLS forecast for the 2022 fiscal year adds $1.385 billion to the estimate that OLS issued in April. But OLS officials also warned lawmakers in the email Tuesday about “general uncertainty regarding the track of the economy through the end of FY 2022.”
Echoes of last year’s budget process
Last year, majority Democrats in both houses of the Legislature faced criticism for how they handled the drafting and adoption of the annual budget — the road map directing how more than $40 billion in revenue will be spent during the state’s July 1 to June 30 fiscal year.
Citing health-safety concerns triggered by the pandemic, the respective budget committees last year only collected written comments on the fiscal year 2021 budget from the public. They also held virtual hearings with a reduced number of administration officials before drafting and sending an appropriations bill to Murphy that relied on a host of increased taxes and the emergency borrowing to support a year-over-year spending increase.
This year, Murphy has proposed another big spending increase that would push the size of the state budget to a record high of nearly $45 billion — pending any changes, which could be announced as early as Wednesday.
Many routine hearings and legislative activities have been interrupted or switched to a virtual format over the last year due to the health crisis. Still, the decision to abruptly cancel Wednesday’s planned Assembly Budget Committee hearings is at odds with the Legislature’s normal routine of having the treasurer appear before them to provide a detailed final revenue update before the July 1 budget deadline.
It remains to be seen whether the hearing will be rescheduled or whether parallel sessions before the Senate Budget and Appropriations Committee that right now are set for Thursday will be canceled as well.
Treasury officials declined to comment Tuesday.
Wirths, who serves as the GOP’s budget officer in the Assembly, said lawmakers were already well into their preparations for Wednesday’s hearings when they found out about the cancellation.
“Everything is last-minute and rushed, and with as little transparency as possible,” Wirths said. “It’s just more of the same.”
In addition to asking about the budget figures, they were also planning to press the administration on how it plans to spend the more than $6 billion in COVID-19 relief the state recently received from the federal government after the adoption earlier this year of the American Rescue Plan Act, he said.