New Jersey treasurer sees escalating budget troubles
New Jersey April tax collections that came in lower than forecast reinforce the need for new tax revenues, said State Treasurer Elizabeth Muoio.
During testimony Monday before the Assembly Budget Committee, Muoio stressed that general fund revenues are growing far slower than anticipated and in many cases declining with the state now on target for a $2.4 billion shortfall for fiscal 2019, which starts July 1. A $37.4 billion budget proposed by Gov. Phil Murphy relies on $1.56 billion of new tax revenues.
“We must take action to correct our serious structural deficit and structural fund imbalance,” said Muoio during her testimony. “General Fund revenues are simply not keeping pace with our obligations.”
New Jersey’s gross income tax revenues have increased 9% so far in the 2018 fiscal year with sales tax collections also on target for growth, according to Muoio. She emphasized however that corporate business taxes have sunk so far, with receipts down 28% compared to a year ago.
Moody’s Investors Service analyst Baye Larsen noted in a Monday report that New Jersey’s 1% year-over-year decline in April income tax collections is “an anomaly” compared to most states that have reported increases. She stressed that despite a “lackluster April, New Jersey’s year-to-date revenues are about $109 million, or 0.5% ahead of the state’s most recent revised budget projections.
Murphy has proposed new revenue measures such as establishing a 10.75% income tax bracket for those earning more than $1 million, raising the sales tax to its previous 7% level from 6.625% and legalizing recreational marijuana. The Democratic governor’s proposals have met resistance from members of his own party, whichcontrols the state Senate and Assembly.
“There is not an appetite in the state of New Jersey for more taxes,” said Assembly Majority Leader Lou Greenwald, D- Lindenwold, during Monday’s hearing. “We need to start looking at budgeting more from a multi-year facet as opposed to year-to-year.”
Muoio stressed that the administration is looking to mitigate structural imbalances by directing $788.5 million of energy tax receipts previously given to municipalities toward the general fund. The state will then provide that same $788.5 million amount to local governments from the Property Tax Relief Fund.
One of Murphy’s chief priorities in his budget plan, according to Muoio, is making a record $3.2 billion pension payment to help combat escalating liabilities that have resulted in New Jersey having the second worst state general obligation bond rating in the U.S. The pension funding would still only put New Jersey at a 60% actuarially funded level and on pace to be fully funded in 2023.
The Assembly budget hearing occurred a week after landmark U.S. Supreme Court ruling that enables sports betting in New Jersey, but Muoio estimates that this will only result in $13 million of new revenue for the 2019 fiscal year. She said sports betting and other “gimmicks of the past” will not answer the state’s fiscal challenges.
“Do we continue kicking the can down the road or do we finally get together and address our funding needs and our structural deficit…in a way that is sustainable and will allow us to grow our economy and invest in the future,” she said. “If it’s not the latter, then we will be right back here next year wondering how we dug ourselves deeper into a hole.”