The OLS study this summer forecasts a $1.01 billion increase in tax revenue that is higher than the $800 million increase anticipated last year. Both OLS and Corzine’s Treasury Department proved to be wildly off in their revenue estimates, as a $2.4 billion drop in income tax revenue forced drastic midyear budget cuts by Christie. While the Federal Reserve noted Friday that the pace of New Jersey’s economic recovery lags behind the rest of the region and most of the nation, the Fed’s analysis that the state’s economy has hit a “plateau at the bottom” indicates that the state budget should at least be immune to another dramatic revenue drop.
The OLS’s $1.01 billion increase represents a 3 percent bounce back in revenues. “It’s not rosy,” Rosen acknowledged. “Traditionally, we’ve gotten a rate of growth of 5 percent in the years following a recession, and with a 5 percent growth rate, you would get back to prerecession revenue levels by FY2014.” With economists forecasting a slower recovery than usual in New Jersey, it looks more like it will be FY2015 or later before state revenue, which is forecast to grow from $28.3 billion this budget year to $29.3 billion in the next budget year, FY2012, returns to its $33 billion high.
The Christie administration dismisses even that projection as optimistic. “There’s no accurate way to forecast that revenues will come back to what they once were,” said Andy Pratt, spokesman for Christie’s Treasury Department, said “We should plan for the worst and hope for the best, not do what Democrats have been doing for the past eight years, which is to hope for a miracle and not plan for the reality.”
Rosen agreed on the hazards of making any revenue forecasts several years in the future. “You can analyze past history, but we can’t make a statement about what’s likely,” he said, saying long-range economic forecasting is “more like a conversation you have in an undergraduate philosophy course — which angels are you going to put on the head of a pin?”