Christie had to make up for the loss of $3.1 billion in “one-shot” revenues from Corzine’s previous budget, which would not be recurring in FY2011. But the worst is over. Next spring, the governor will only have to make up for $1.305 billion in nonrecurring revenue, and if he is able to get through the FY2012 budget the way he did this year, the figure for the following year will be no more than $200 million or so.
The biggest chunk of “one-shot” revenue in both years is federal stimulus money from the Obama administration that was doled out over three years. The program helps state governments maintain vital health, education and capital programs during the recession in the face of declining state tax revenues. Federal stimulus funding dropped by $1.6 billion last year; the lion’s share of the cut was in school aid, and Christie passed along most of that cut to school districts by slicing state aid to education by $828 million.
The last $1.03 billion in federal stimulus money is scheduled to go away in the FY2012 budget. But because that was an increased federal share of annual state Medicaid spending that is extremely difficult to cut and essentially amounted to a direct state budget subsidy, Christie will have to find the money to make up for that cut elsewhere in the budget. (Like other states, New Jersey has a hole in this year’s budget — $600 million — if Congress fails to extend Medicaid funding for the second half of FY2011, but Congress is expected to do so.)
Christie already covered the “one-shot” loss of $1.1 billion from the “millionaire’s tax” state income tax surcharge on those earning more than $400,000 a year. He refused to allow the Democratic Legislature to extend it, and the $272 million in miscellaneous “one-shot” revenues that Christie relied upon last year were less than the $400 million in Corzine’s last budget.
From a structural standpoint, the state is more than halfway through dealing with its reliance on “one-shot” revenues from federal stimulus funds and state income tax surcharges that were needed to get through the recession. It is that fact, coupled with the sense that the decline in state revenues has bottomed out, that Christie was referring to when he declared, “We’re going to have a budget situation to deal with if the economy doesn’t pick up more, of course we are. But it’s not going to be as severe as the one we had to deal with last year.”