New Jersey’s Treasury Department yesterday announced that tax collections came in $190 million below prior estimates for the first quarter of fiscal 2010 — 3.1% lower than expected. Officials identified $205 million of immediate spending cuts to offset lagging receipts.
In addition, Gov. Jon Corzine directed his administration to find another $200 million of spending reductions by Dec. 1, for a total $405 million of budget cuts.
Personal income and business tax collections came in lower than expected. Gross income tax receipts and corporate tax collections came in $67.1 million and $45.7 million below target, respectively. The state collected $1.98 billion of GIT revenue and $439.4 million of business revenue, according to the Treasury Department.
In addition, July through September transfer inheritance tax collections totaled $134.7 million — $48.3 million, or 26.4%, less than budgeted. Insurance premium receipts fared even worse. Officials originally budgeted for such revenue to be a negative $3.7 million for the first quarter, yet insurance premium revenue is a negative $27.8 million.
“As has been the case for virtually every other state that has reported revenue activity in the new fiscal year, New Jersey is experiencing the continuing effects of the global economic downturn,” Treasurer David Rousseau said in the first-quarter revenue report. “While the current year budget is nearly $4 billion less than the budget signed last year — by far the largest reduction in state history — collections through the first quarter have fallen short of our conservative projections.”
To absorb the revenue loss, the administration anticipates spending reductions and cost savings.
Roughly $20 million will come from additional debt service savings the Treasury department realized earlier this year. The interest costs on the state’s short-term borrowing is $10 million less than officials were anticipating and debt restructuring deals earlier this year generated savings that were $10 million above prior estimates, according to Treasury spokesman Tom Vincz.
Overall, New Jersey aims to achieve $460 million of debt-service savings in fiscal 2010 from extending maturities on existing debt and have realized $325 million of that goal, Vincz said.
Another $26 million of savings will come from employee salary decreases from a continued decrease in the state’s workforce, and New Jersey will gain $13 million from a new pharmacy benefits contract within the State Health Benefits program, among other expenditure reductions.
In addition, the administration will now look to trim the budget by another $200 million, with departments and agencies to identify reductions by Dec. 1.
“Through four tough budgets, we know how to cut spending and protect education, health care, and other services that are most vital to the people of our state,” Corzine, a Democrat, said in yesterday’s report.
In response to the governor’s budget plans, Senate Minority Leader Tom Kean, R-Essex, said the $405 million of savings does not properly address a potential $1 billion fiscal 2010 deficit if collections continue at the sluggish pace.
New Jersey isn’t the only state looking for mid-year budget cuts.
New York Gov. David Paterson last week announced his plan to cut $1.8 billion of spending in the fiscal 2010 budget to help close a $3 billion deficit. The state’s fiscal year began April 1. Tax collections through Sept. 30 are $634.5 million below earlier projections.
Massachusetts Gov. Deval Patrick last week also called for current-year budget cuts as the Bay State now anticipates fiscal 2010 tax revenue to come in $600 million below prior estimates. The governor announced possible furloughs and layoffs, suspension of programs, and merging of government agencies. Its fiscal year began July 1.
While it continues to steer through fiscal 2010, the Garden State anticipates a difficult fiscal 2011 budget. The Office of Legislative Services earlier this year projected the state will begin fiscal 2011 with an $8 billion deficit. That estimate reflects near-term and future retirement costs, non-recurring funds from the American Recovery and Reinvestment Act, and the end of a one-time state income tax hike, among other factors.
Mary Forsberg, interim president at the New Jersey Policy Perspective, a nonpartisan organization that researches and analyzes Garden State policy, stressed the importance of having fiscal 2010 revenue collection results to better gauge what the state could be facing for fiscal 2011.
“Next year will be a more difficult budget than this year’s budget was, I don’t think there’s any question about that,” Forsberg said. “But the fact that we’re just 3% below what was estimated, I think, is really actually a good thing.”