New Jersey's nonpartisan Office of Legislative Services projects that fiscal 2010 and fiscal 2011 tax collections will come in almost $250 million below Gov. Chris Christie's revenue estimates, due in part to sluggish sales tax receipts.
The OLS revenue projections come as Fitch Ratings on Tuesday announced that its recalibrated rating for New Jersey is AA compared to its prior rating of AA-minus.
OLS legislative budget and finance officer David Rosen yesterday testified before the Assembly Budget Committee regarding the current and fiscal 2011 budgets. Rosen said his department anticipates fiscal 2010 revenues will total $27.64 billion —$81.7 million under budgeted estimates. Fiscal 2010 ends June 30.
In addition, OLS projects fiscal 2011 tax revenue to total $28.1 billion, which is $167.7 million below Christie's revenue estimates for the next fiscal year. The combined revenue difference for the two years is $249.4 million.
Rosen described the varying revenue projections as small. Underperforming sales tax revenues account for much of the revenue difference. Sales tax receipts would need to grow by 5.1% in the final five months of fiscal 2010 to reach a budgeted estimate of $7.52 billion. Rosen believes a 5.1% growth in sales tax receipts is unlikely.
"The revenue estimating differences between the executive and the OLS are relatively minor," Rosen said during his prepared address before the committee. "The combined two-year difference is $249.4 million, or less than 1%. The largest difference is for the sales tax, for which the OLS anticipates $313 million less over the two fiscal years combined. That sales tax difference is due to underperformance so far this year that will make it nearly impossible to achieve the executive's target for fiscal 2010. That difference then rolls into next year."
Treasurer Andrew Eristoff yesterday also testified before the committee. He noted that while not insignificant, the $167.7 million revenue difference for fiscal 2011 is "one-half of 1% of the proposed budget."
In looking at the current budget, Eristoff said any revenue shortfalls along with additional spending would need to be addressed before the end of the fiscal year. He did not give details of how the state could close a potential budget gap.
"OLS has also estimated fiscal 2010 revenues will be $81.7 million below Treasury's estimates as of February," Eristoff said in his prepared testimony before the committee. "This, in conjunction with the fact that we have incurred additional supplemental needs, makes it important that we work together to address the remaining fiscal 2010 close-out issues in the coming weeks."
A common theme throughout the budget discussion was the potential fallout to local governments from spending cuts in school aid and municipal aid. Many lawmakers believe the reductions will force local governments to increase property taxes. New Jersey has some of the highest property taxes in the U.S. In addition, Christie's proposal would suspend property tax rebates in 2010.At the same time, the governor has said he would veto any tax increases, including increasing taxes on the state's wealthiest citizens.
The administration has said the state must curb its expenditures to keep spending in line with recurring revenue and ease tax burdens for residents and businesses.
"Simply put, Gov. Christie's proposed budget is ultimately about rebuilding New Jersey's economy," Eristoff said. "Only a strong, competitive, and growing economy can support the quality of life and government services that New Jerseyans deserve and expect. Repositioning New Jersey for economic growth will necessitate major changes in New Jersey's state and local governments, beginning of course with adopting a budget that starts to return the state to a sound and sustainable financial footing. And that, in turn, means facing up to the need to make many very difficult choices."
