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N.J. faces surprise revenue shortfall that Christie has 6 weeks to confront

Friday, May 20, 2016   (0 Comments)
Share | 05/20/16

State budget officials predict New Jersey will face a $487 million budget shortfall this year and $622 million shortfall next year due mostly to sluggish income tax collections. The nonpartisan Office of Legislative Services will present its estimates to the Assembly Budget Committee on Wednesday, and the Treasury Department will follow up later in the day with its own final revenue figures. In a memo obtained by NJ Advance Media and first reported by PolitickerNJ on the eve of that update, OLS said "recent performance of the gross income tax" is responsible for nearly all of the projected $1.1 billion gap. Gross income taxes represent 40 percent of the state's total revenue.

In April, the OLS's estimate for state revenue collections was $162 million below the administration's, a meager difference in the context of the state budget. But that gap has now widened to $1.1 billion. "In total, for the two fiscal years combined, the OLS forecast is now $1.1 billion below the executive's estimates as contained in the governor's budget recommendation," OLS said in the memo. Both Treasury and OLS officials warned in April that the state's gross income tax collections were top heavy and as a result, highly sensitive. "The top 1 percent of taxpayers provide over 35 percent of the state's gross income tax receipts, while just the top 100 filers pay over 5.5 percent of all (gross income tax) payments," Acting Treasurer Ford M. Scudder said at the time. "That inherently makes the tax system much more volatile and much more difficult to predict a year out," he said.

The projected shortfalls amount to about 1.7 percent of the $66.8 billion in planned spending spread over the two years. Gov. Chris Christie will have to confront this year's $487 million budget gap in the six weeks before the fiscal year ends June 30. Officials often note there's little left in the treasury this late in the fiscal year.  In the past, that's led Christie to target money set aside for the annual contribution to the public pension fund that isn't made until the end of the fiscal year. He reduced pension payments by $2.43 billion over two years to balance state budgets, triggering high-profile legal challenges from public unions who eventually lost the fight for more funding. This year's $33.8 billion budget includes $1.3 billion for the declining government worker pension fund. The proposed $34.8 billion budget in lawmakers' hands now is short $622 million. Christie proposes spending nearly $1.9 billion on pensions next year.

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