N.J. Lawmakers to Discuss $10.5B Deficit for FY 2012

The New Jersey Legislature on Aug. 5 will discuss the state’s projected $10.5 billion structural deficit for fiscal 2012.

Assemblyman Lou Greenwald, D-Camden, chairman of the Assembly Budget Committee, announced Monday that the panel expects to hear testimony from the Office of Legislative Services that day regarding the anticipated shortfall. Fiscal 2012 begins July 1, 2011.

The committee will hear from administration officials at a later meeting. The OLS is a nonpartisan agency that provides analysis and data to the Legislature.

Greenwald said the state cannot continue to do things the same way.

“This is obviously a big concern that needs to be addressed,” Greenwald said in a statement. “We cannot continue to rely on moves such as failing to make pension payments and slashing property tax relief. Real change and plans to stimulate our economy, create jobs, and put people back to work are what’s needed.”

The OLS on July 12 calculated a $10.47 billion structural deficit for the next fiscal year at the request of Assembly Democrats. Its research considers all of the state’s statutory obligations as well as current state programs in relation to existing revenues.

The imbalance is partly due to recurring expenditures that the state did not incorporate into this year’s budget and to reduced allocations for certain statutory programs.

The fiscal 2011 budget does not include $3 billion of the state’s pension contribution. Gov. Chris Christie also cut state aid to municipalities and school districts by $445.9 million and $819.5 million, respectively, and property-tax rebates for 2010 were slashed by $848.2 million. Those actions helped close a nearly $11 billion deficit for fiscal 2011.

New Jersey will again face those obligations when crafting the fiscal 2012 budget. The OLS projects the fiscal 2012 pension contribution — which incorporates current and future retirement costs — at $3.53 billion. To fully fund aid to schools and municipalities, the state would need to allocate $2.3 billion and $330 million, respectively. Complete property-tax rebates to homeowners would cost the state $2.13 billion next year.

Other expenditures include $1 billion to cover expiring enhanced federal Medicaid reimbursement funds, $800 million for transportation infrastructure, and $400 million for employee salary and health care benefit increases.

Total spending increases of $11.48 billion minus $1 billion of base revenue growth accounts for the $10.47 billion shortfall, according to the report.

The $10.5 billion structural deficit projection was first reported in the Star-Ledger.

As it did this year, the Legislature and the administration have the ability to skip certain payments, reduce funding for programs, or eliminate programs to help balance the budget.

“Not only is this structural deficit figure theoretical, it is also dynamic and will no doubt shift with changes in economic conditions and programmatic decisions between now and the time that the fiscal 2012 budget is crafted,” the OLS report reads.

To help reduce New Jersey’s structural deficit, the governor is looking to additional pension and health care reform as well as potential public-private partnerships to help reduce recurring expenditures, said Treasury spokesman Andrew Pratt.

To help rein in employee costs, Christie in late March signed wide-spread bipartisan legislation that addresses certain pension expenses and requires all state employees, including teachers, to contribute 1.5% of their salaries towards health care costs.

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