Revenues just keep underperforming in New Jersey as officials yesterday announced that a $32 billion fiscal 2009 budget now has a $3.6 billion deficit, due in part to sluggish January collections that came in $526 million below projections.

Along with lower-than-anticipated revenues, the state will need to spend an additional $800 million for necessary programs, such as augmenting its unemployment insurance trust fund in order to hold off mandatory tax increases to employers. Last month, the state pegged its budget shortfall at $2.1 billion.

To help close the growing budget gap, Gov. Jon Corzine announced $473 million of additional spending cuts along with other measures.

The state will use an additional $175 million of rainy-day funds and redirect $160 million of dedicated revenues to support programs backed by general fund revenues.

In addition, Corzine proposed a tax amnesty program that could generate $100 million and said he will impose two days of unpaid furlough for all state employees to save $35 million.

"We are in unprecedented times, and therefore unprecedented action is necessary to keep the state on sound financial footing," Corzine said in a press release. "With revenues continuing to trend downward, we must take appropriate steps to continue to live within our means."

In addition, to help balance the $32 billion budget, the state anticipates using roughly $850 million it will receive from the federal stimulus package - including $600 million of Medicaid funds - that President Obama signed into law yesterday.

The state's deficit grew to $3.6 billion as revenue collections have fallen below earlier calculations. While New Jersey gained $2.4 billion of total revenue in January, that is $526 million short of previous projections, according to the Treasury Department.

Income tax receipts for the month came in $230 million under budget, a 13.8% decrease, and business tax revenues dropped by $111 million, or 89%, to total $13.7 million. Sales tax revenues were also weak in January, coming in $120 million short of earlier estimates, a 20.2% decline.

For the current fiscal year so far, total state revenues are down by $1.33 billion, including $635 million less in income tax receipts than previously budgeted.

Corzine's announcement follows $812 million of earlier spending cuts. In addition, in January he said he would use $500 million of debt defeasance revenue that officials previously set aside to help pay down New Jersey debt, grab $275 million of rainy-day funds, and tap into roughly $200 million of surplus funds from fiscal 2008.

The governor said that if revenue collections continue to fall below projections, the state will need to take further steps to keep expenditures in line with revenues.

"The cuts we have made so far this year are just part of the actions we will need to take to deal with this unprecedented economic crisis," Corzine said. "We hope the adjustments we make today will allow us to get through the year, but if revenues continue to decline, we will have to find additional actions to maintain our balanced budget obligation."

Corzine is set to release his fiscal 2010 budget proposal on March 10. Officials expect a more than $6 billion deficit for that fiscal plan, with $28.5 billion of anticipated revenues.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.