New Jersey Treasury Department officials Tuesday announced the state will collect $511 million more in revenue this year and next than previously expected.
The state aims to use the additional revenue to increase property tax rebates and boost pension contributions.
Strong personal-income tax collections account for the revised revenue outlook. The Treasury expects the state will receive $10.53 billion of income tax receipts in fiscal 2011, $460 million more than earlier calculations. Fiscal 2012 income tax revenues are now projected to total $11.13 billion, $604 million above budgeted estimates.
The better-than-expected personal income tax receipts are offset by underperforming corporate tax revenue, which Treasury officials anticipate will come in $382 million below previous estimates for this year and next.
The Office of Legislative Services, a nonpartisan fiscal research group, has more optimistic revenue estimates overall. The OLS projects the state will collect $913.4 million more revenue in fiscal 2011 and fiscal 2012, $402.4 million above what Gov. Chris Christie’s administration expects it will bring in.
According to OLS budget estimates, New Jersey will collect $1.44 billion more in personal income tax revenue this year and next, while corporate tax collections will come in $442.6 below earlier estimates for the two years combined.
Treasurer Andrew Sidamon-Eristoff released the updated revenue numbers Tuesday in his testimony before the Assembly Budget Committee. Eristoff said the administration aims to increase its fiscal 2012 pension payment by $253 million to $759 million in light of the additional revenue.
The fiscal 2011 budget does not include a payment to the pension system. In February, Christie proposed paying the fiscal 2012 pension contribution this year in order to help strengthen the fund, which has a funding level of 56%. New Jersey’s unfunded pension liability is $37.1 billion.
Moody’s Investors Service on April 27 downgraded New Jersey to Aa3 from Aa2, citing the state’s weak financial condition and slow economic recovery along with rising retirement liabilities. Standard & Poor’s in February dropped the state to AA-minus from AA due to unfunded pension and other-post-employment benefit obligations.
“As outside observers have noted repeatedly, our various pension systems are woefully underfunded to the point of having negatively impacted our credit rating, thus making it more expensive for the state and our localities to finance critical infrastructure and other capital needs,” Eristoff said during the budget hearing.
In addition to directing some of the surplus revenue to the pension system, the administration is looking to give $225 million of additional property-tax relief to homeowners as part of the proposed fiscal 2012 budget. That allocation is dependant upon the Legislature passing a health care reform initiative that would increase employee contributions to their health insurance coverage.
“The governor has amended his budget proposal to double the Homestead Benefit from fiscal 2011 levels and to make the difference between doubling and tripling the benefit contingent on achieving fundamental health benefits reform,” Eristoff said.
The treasurer also cautioned the committee on using surplus revenue for spending programs that could be unsustainable in the future.