NJ Budget $200 Million In The Hole, Says Analyst [AUDIO]

In a memo sent to budget committee members in the State senate and General assembly yesterday, David Rosen, the legislative budget and finance officer with the non-partisan Office of Legislative (OLS) services writes, “Assuming that the transfers and accruals follow the pattern of recent years and assuming the remaining cash collections match recent months, FY 2012 revenue collections are likely to fall $150-200 million below the FY 2012 targets announced by Treasury in May.”

The budget Governor Chris Christie signed late last month sets aside $183 million for a tax cut to be enacted in January if revenues hit Christie’s targets. Democrats say the memo shows they were being fiscally responsible when they held off on the tax cut despite Christie’s demands for the guarantee of one now.

“Everybody wants to give a tax cut,” says Assembly Budget Committee chairman Vinnie Prieto. “It has to be the right tax cut and we have to be able to pay for it…….The OLS numbers make the argument that being prudent and holding off on a tax cut was the right thing to do.”

The OLS memo also says, “he closing balance for FY 2012, which becomes the opening balance for FY 2013, will not be known until the release of the Comprehensive Annual Financial Report (CAFR) which usually occurs around December. That balance will be determined by the actual revenue collections and the actual expenditures. While we should have a good handle on the collections from the major taxes by August, the final amount of spending (or the value of lapses from FY 2012 appropriations) and the yield from miscellaneous revenues will not be known by OLS until the CAFR. It should be noted that the Governor’s revenue certification on June 29 increased the assumed FY 2012 lapses by $46 million above the level assumed on May 23.”

An emailed statement from the Governor’s press office says, “It’s not shocking that, once again, OLS jumps the gun with a hasty and speculative analysis that takes a dour view of revenue figures in order to serve the agenda of Corzine Democrats in the legislature (a group that has hung their hat on rooting for failure in hopes of holding tax relief hostage for middle-class New Jerseyans). This is to say nothing of OLS’ record of being consistently and ADMITTEDLY off the mark with their projections.”

In his memo Rosen did write, “Of course, if these assumptions prove incorrect collections could be higher or lower.”

Christie’s press shop points out that the economy is still growing. The state income, sales and corporate business tax revenues are up $85 million over the Treasurer’s May estimates and overall, FY 2012 revenues are up 3% over last year.

Better Choices for New Jersey coordinator Bill Holland says, “This new report is just the latest confirmation that the legislature was right to delay consideration of any tax cut until they were sure the state could afford it. Governor Christie can travel the country demanding his reckless tax cut, but a sensible plan that ensures the state has the revenue to pay for it is necessary to actually deliver the economic growth New Jerseyans need. With the state’s unemployment rate still a full point above the national average, Gov. Christie’s ‘New Jersey comeback’ looks more like a New Jersey setback.”

Memo From OLS

While Fiscal Year 2012 ended last Saturday, the final collection and allocation of revenues continue into the new fiscal year. For some revenues, such as the sales tax, a full month of collections remain to be received as June sales tax collections are remitted to the Stateon July 20. For others, such as the corporation business tax, sizable transfers and adjustments are made even though no further payments are due.

Assuming that the transfers and accruals follow the pattern of recent years and assuming the remaining cash collections match recent months, FY 2012 revenue collections are likely to fall $150-200 million below the FY 2012 targets announced by Treasury in May. Of course, if these assumptions prove incorrect collections could be higher or lower.

The closing balance for FY 2012, which becomes the opening balance for FY 2013, will not be known until the release of the Comprehensive Annual Financial Report (CAFR) which usually occurs around December. That balance will be determined by the actual revenue collections and the actual expenditures. While we should have a good handle on the collections from the major taxes by August, the final amount of spending (or the value of lapses from FY 2012 appropriations) and the yield from miscellaneous revenues will not be known by OLS until the CAFR. It should be noted that the Governor’s revenue certification on June 29 increased the assumed FY 2012 lapses by $46 million above the level assumed on May 23.

Turning to FY 2013 revenue collections, it is unlikely that significant information will be available during the summer. July and August are not important months for the gross income tax or corporation business tax and the allocation of collections between the old and new fiscal years often makes it difficult to discern patterns.

We will of course keep the committees informed of any significant revenue developments.

David J. Rosen