New Jersey officials estimate the state may collect $606 million less in revenue than previously budgeted in fiscal 2009 and fiscal 2010 due in part to business tax refundings outweighing corporate tax receipts.
David Rosen, budget and finance director for the Office of Legislative Services, yesterday testified before the Senate Budget and Appropriations Committee that New Jersey's total revenues may come in $383 million and $223 million under previous projections for the current fiscal year, which ends June 30, and fiscal 2010, respectively. The OLS had six weeks of additional data beyond the Treasury Department's earlier calculations regarding fiscal 2010.
In addition, Rosen stressed that final revenue collections could vary greatly between OLS' calculations and the executive branches' estimates.
"Whatever the normal margin of error is in our forecasts, it is much larger than that this year," Rosen said before the committee. "Typically, when the executive and the OLS disagree on revenue, it is safe to assume that the final number would fall somewhere between the two estimates. Not so this year - it is just as likely the end result will be higher than the executive's number or lower than ours."
All of the state's revenue streams are underperforming, and OLS now predicts $150 million less in corporate business tax revenue in fiscal 2009 than previously budgeted. Rosen said the state is paying out more in business tax refunds for prior-tax years than it is receiving in current corporate-tax receipts, a first for New Jersey.
"Through the end of February, CBT collections are down 26.7% below the same period last year, " Rosen said.
He projects gross income tax receipts and sales tax revenue to come in $139 million and $80 million below budgeted projections, respectively, in the two fiscal years combined.
In addition, OLS' new revenue projections do not include the possible impact of higher income taxes in New York. Empire State legislators last week approved increasing income taxes, which high-income New Jerseyans who work in New York must pay. Those Garden State residents apply their New York tax payments against their New Jersey income tax statements. Rosen estimates the potential tax hike may cost roughly $200 million.
"We don't have any good data to let us know how that will play through, but it is one more risk that's out there on the horizon for us," he said.
If lawmakers need to address further budget shortfalls in the current spending plan, Rosen said the list of budget-balancing possibilities is short and includes imperfect solutions such as reducing the state's pension contribution even further or dipping into the $500 million surplus that will carry forward into fiscal 2010.
"There aren't a whole lot of options," Rosen said. "But many of the expenditures - by the time you get to May - many of the expenditures in the fiscal 2009 budget have already been made or irrevocably committed where we have entitlements ... Basically, bills are going to come in that we have to pay. So, the later you get into the fiscal year, the more difficult that is."
Lawmakers earlier this year closed a $3.6 billion deficit in the $32 billion fiscal 2009 budget with spending cuts, tapping into rainy-day funds, and redirecting debt-reduction funds to balance the budget.
State Treasurer David Rousseau also testified before the committee. His department is looking into refinancing prior general obligation and state-appropriation bonds to generate roughly $361 million of savings for New Jersey over a period of several years. The Treasurer did not specify which series are potential refinancing candidates.
"We're looking to build four or five years worth of relatively the same amount of savings, of $360 million, give or take," Rousseasu said. "I'm not going to say that each year will be $361 million and then have a couple of years of maybe no savings. So in other words, no savings or no increase and then there could be some dis-savings after that, but overall we will have a present-value savings during that period of time."