Gov. Chris Christie’s biggest fiscal headache is not how to pay for a $2.4 billion pension payment in next year’s budget, but how to fill a projected $800 million gap in the current year budget over the next four months.
For the politically weakened Christie, presenting a convincing solution to cover the revenue shortfalls, Internet gaming bust, and new spending needs in the FY14 budget in tomorrow’s Budget Address is the critical first step to convincing the Democratic-controlled Legislature that the state can afford a tax cut next year.
With fiscal experts saying privately that the state can expect a robust $2 billion in tax growth in the FY15 budget, Gordon MacInnes, president of liberal think tank New Jersey Policy Perspective, was sufficiently worried about Christie’s plans that he authored aarguing that tax cuts are ineffective economic tools and that Christie has been unable to fund vital services without budget gimmicks
For Christie, a public debate over a tax cut -- even one built on-- would give the embattled governor something to talk about in town meetings and Republican Governors Association fund-raisers where he isn’t talking about Bridgegate or the other scandals that have cut deeply into his New Jersey approval ratings and cost him his lead in the 2016 GOP presidential sweepstakes.
In this political environment, with Christie taking a daily shellacking over Bridgegate, it’s easy to forget how close Christie came in the spring of 2012 to winning approval of a four-year property tax deduction worth up to $1,000 on state income taxes originally proposed by Senate President Stephen Sweeney (D-Gloucester).
That deal foundered when the Christie administration started what is now a two-year streak of state tax collections coming up short of its own overly optimistic revenue projections almost every month. And Christie’s personal attacks on the Legislature’s nonpartisan budget expert David Rosen as “the Dr. Kevorkian of the numbers” only made it worse when Rosen’s more conservative numbers continually proved right.
This spring, for the third year in a row, Christie will have to fill a current-year budget gap of his own revenue forecasters’ making.
The first time, as his tax cut deal with Sweeney foundered, Christiefor FY12 primarily by shifting $200 million in Clean Energy funds earmarked for homeowner assistance into the general fund to balance the budget, and by using $261 million in that was supposed to go into the Transportation Trust Fund to balance the budget, which added to the state’s debt.
Last spring, Christie was bailed out when anback into the 2012 tax year to dodge an increase in the top federal income tax bracket helped wipe out part of a $700 million current year shortfall. Treasurer Andrew Sidamon-Eristoff made up another $392 million by from May into August, a budget gimmick that created a “one shot” saving for the FY13 budget.
“This year won’t be as easy,” said one fiscal expert who asked not to be identified. “Christie got a big bailout in 2013 with the extra income tax money and moving up the property tax rebate. But you can only do that once. And the Turnpike toll money and Clean Energy funds are already included in this year’s budget, so that’s out.
“The other problem is the surplus. The surplus is so low he can’t go down to a $100 million surplus and expect the Legislature to go along with him on a tax cut. He’s going to have to show at least a $300 million surplus going into next year, even if it’s just to give himself some room in case the April or May revenue figures are bad,” the fiscal expert said. “If he can get through FY14, though, FY15 should be easy.”
Christie’s FY14 problem, like the previous two current-year deficits, includes a shortfall for the first seven months of the fiscal year that Rosen, OLS’s budget director, said in a letter to legislators last week would be higher than $400 million, based on his review of Treasury Department collections through January 31.
The $400 million figure does not include the full $135 million anticipated shortfall in Internet gaming revenues. The Christie administration forecast that online gaming would bring in $160 million, but the program did not get started for almost five months. Rosen put a $40 million “placeholder” in the budget for online gaming revenues, asserting that the administration had provided no evidence to support its claim, but even that projection is now expected to be high.