Structural Deficit

OLS touched off the predictable partisanship last week when it estimated that the structural deficit for the next budget will be $10.472 billion — almost $2.5 billion higher than the $8 billion that OLS forecast the summer before.

Assembly Budget Committee Chairman Lou Greenwald (D-Camden), whose staff had requested the OLS deficit estimate, promptly scheduled an August 5 hearing.

“We cannot continue to rely on moves such as failing to make pension payments and slashing property tax relief,” he declared. “We cannot continue to do the same old things.”

It’s a familiar chorus that Christie himself repeated during the 2009 campaign, when he excoriated Democratic Governor Jon Corzine for the looming $8 billion deficit, only to see the actual problem ballooned to $11 billion.

While Corzine insisted it was “too soon” to forecast the size of the upcoming budget deficit, Christie went one step further now that he is governor and denounced the OLS study outright.

“The number is completely fake, and doesn’t understand the new reality,” Christie said at a press conference Wednesday.

Christie has emerged as the darling of the national Republican media for his no-nonsense Jersey guy persona and no-new-taxes, cut-spending-instead attitude. He had just released a “How Do You Like New Jersey Now?” YouTube video taking credit for signing an FY2011 budget that “closes [an] $11 billion deficit without raising taxes.” That $11 billion deficit figure, of course, is based on the same methodology the OLS used in calculating the budget deficit forecasts both years.

David J. Rosen, the respected longtime director of the OLS Legislative Budget and Finance Office, is used to controversy. He prefaced his forecast with his usual caveat: “the estimation of the State’s structural deficit is essentially an academic undertaking, dependent upon definitional assumptions and open to a range of defensible alternative conclusions.”

Caveats aside, a comparison of the OLS study clearly shows that the budget challenges that Christie and Democratic legislative leaders will face next spring year’s are very different than those they faced in balancing the budget last month.

The OLS budget deficit projection is based on a forecast of whether tax revenues will rise or fall, on how much non-recurring revenue needs to be made up and on what it would take to meet both the statutory and the programmatic needs for increased spending on major programs. Because it uses the same methodology every year, the projection provides a valid comparison in all three areas.