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Christie administration reveals plan to close $1B budget gap

Friday, May 20, 2016   (0 Comments)
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NJ.com 05/20/16

Gov. Chris Christie's administration said on Wednesday that the state budget for the fiscal years 2016 and 2017 face a combined revenue shortfall of close to $1 billion, but that it will be closed with surplus funds and a variety of spending cuts. The estimated  $1 billion gap crosses two years, including the six weeks left in the fiscal year ending in June and the new fiscal year beginning July 1. The figure represents just 1.7 percent of spending over the two budget years, and lawmakers received the new information Wednesday with little alarm. Treasurer Ford Scudder, who presented his final revenue figures shortly after the nonpartisan Office of Legislative Services painted a similar picture, told the Assembly Budget Committee that the budget would be able to weather the shortfall with "reasonable spending restraints." Officials blamed the lowered revenue estimates on lagging gross income tax collections from workers' withholdings and from such non-earned income as capital gains, which together account for 40 percent of the state's total revenue.

"While it is too soon to know exactly what is causing these results, the preliminary conclusion is that the weakness seen in spring tax filings reflects the weak stock markets in 2015," Frank Haines, the budget chief for the OLS, said. Haines said the state "really got a multiple whammy." "If the only thing that we misinterpreted to the same scale we misinterpreted in this forecast was just final payments, we wouldn't be having much of a story today," he said. "It wouldn't have much of an impact on the bottom line. If it was only estimated payments, if it was only withholding, we would not be giving you such dire news as we're giving you today. But it's all of those things." The administration said it will balance the budget without such major disruptions as slashing the billions the state is scheduled to pay into the public worker pension fund over the two years. Instead, it will reduce spending from the general treasury by $363 million in the month and a half left in this budget year and $303 million next year, according to budget documents.

Shortfalls late in the year leave budget officials with little money left in the treasury and little recourse. And these cuts aren't likely to stir the same kind of outrage as previous shortfalls that prompted reductions in pension contributions. In addition, the administration plans to dip into its small but growing surplus fund to balance the budgets. To avoid taking too much from that fund, Scudder recommended the state push off tax credits owed to businesses and cut $25 million from Charity Care funding provided to hospitals to treat uninsured patients — a cut would cost New Jersey another $25 million in federal matching dollars. In the coming fiscal year, the state was expected to start meeting its obligation on grants for the Business Employment Incentive Program. Nearly 500 businesses have been waiting for the funds, a reward for creating jobs. Starting next year, those businesses could choose to convert the grants they were promised but not likely to receive into credits spread over several years.

Under Scudder's proposal, companies that opt in will receive a fraction of their credit next year, saving the state $135 million. Michele Siekerka, president of the New Jersey Business and Industry Association, said she was disappointed by the delay, but Michael Egenton, vice president of governmental relations for the state Chamber of Commerce, said he expected that many businesses would understand. "I think most of my members know the fiscal challenges," Egenton said. Scudder also said he wanted to change the way it taxes lottery winnings, which will not increase the amount of money the state collects but when it collects it.

 


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