New Jersey treasurer urges surplus as budget priority
New Jersey lawmakers should remain fiscally disciplined and protect a planned $1.2 billion budget surplus while crafting the 2020 budget, State Treasurer Elizabeth Maher Muoio told them.
The state’s top fiscal officer testified to the Assembly Budget Committee Monday that Gov. Phil Murphy’s proposed $38.6 billion spending plan would position New Jersey for back-to-back $1 billion surpluses for the first time in recent memory. While the surplus would be far larger than the $400 million average New Jersey had between the 2010 and 2018 fiscal years under Gov. Chris Christie, it would still only equate to 3% of the total budget, well below the 10% national state surplus average.
“Our surplus is the only safety net we have in the event of an emergency, including situations we are all too familiar with, such as the increasing severity of storms, and the potential for a severe economic downturn or recession” Muoio said. “We cannot simply treat it as an ‘extra’ pot of money available to be raided.”
Muoio said the states that recovered quickest from the last recession a decade ago were those with the healthiest surpluses. She said in order for New Jersey to be on par with other state surplus levels, the state would need to budget $2.7 billion more for reserves in the budget.
“We have a long way to go to get to that level — one that is adequate enough to support our fiscal needs in the event of an economic downturn, which is something the ratings agencies look favorably upon as an indicator of sound financial management,” Muoio said.
Frank Haines, budget and finance officer for New Jersey’s Office of Legislative Services, said in his own Assembly testimony Monday that revenue projection risks in Murphy’s budget will make it harder to meet the $1.2 billion surplus target. The OLS is projecting the current 2019 fiscal year revenue to be $109 million behind estimates and $182 million for 2020.
“The surplus projection, adjusting only for our revenue forecast, is not a comfortable projection — it is an over projection,” Haines said.
Haines cited research from Pew Charitable Trusts showing that median number of days that a state can operate on its reserves numbers about 40 with New Jersey only positioned to last just eight. The Pew report highlighted that 23 states have increased reserves compared to the last recession period from 2007 to 2009 with New Jersey not among them, Haines said.
New Jersey entered April needing a big month in tax collections after the Department of Treasury announced on March 14 that total state revenue growth has fallen behind its budgeted forecast. Muoio told lawmakers Monday that personal income taxes lagged in December and January because of federal tax changes not offering previous benefits for filing early, but expects an April surge.
“This year we are urging caution when it comes to jumping to negative conclusions and projecting dire shortfalls before we have a clear picture of April revenue collections,” she said. “In about six weeks we will have a much better idea if this April’s receipts will confirm our belief that changes in historical tax planning behavior are largely responsible for the recent collection patterns we have seen.”