TRENTON — After years of cutbacks, New Jersey is hiring new auditors in a bid to increase tax collections.

State Treasurer Ford Scudder told the Assembly Budget Committee at a hearing Wednesday on Gov. Chris Christie’s spending plan that the state is aiming to boost collections of income, sales and business taxes by stepping up enforcement.

“We are in the final stages of selectively hiring new revenue-enhancement employees at the Division of Taxation, including auditors and research analysts, that will lead to far higher levels of compliance,” said Scudder.

The number of Treasury Department auditors has been reduced by nearly 30 percent since 2009, the last full fiscal year before Christie took office.

Assemblyman Gary Schaer, D-Passaic, said similar cuts in managers, auditors and compliance officers have had a deleterious effect on many state departments.

“I think to one extent, our response needs to be that times are rough and we need to work harder and smarter,” Schaer said. “But why would we be taking an exact opposite point of view in terms of Division of Taxation than we’re taking with our other various departments?”

Scudder said they’re not taking an opposite approach. He said all departments make adjustments to reach optimal levels of employees.

He also said there’s not a specific goal in mind for measuring how much additional tax collections the new employees would need to bring in to be considered a success.

“There’s going to be an incremental improvement in voluntarily compliance, as well as in ensuring that taxpayers pay the correct amount, whether they’re currently paying too high or too low. We want people following what is statutorily required of them,” Scudder said.

In 2009, the last full budget year before Chris Christie became governor, the Treasury Department averaged 434 auditors. It currently averages 310, though plans to increase that to 347 next year.

New Jersey’s budget can rely on a stronger economy but still has only a thin margin of error, budget analysts said as lawmakers kicked off their intensive review of Christie’s $35.5 billion spending plan.

Lawmakers have held four public hearings, with a fifth to come next week, but the hearings at which the Office of Legislative Services and state treasurer delve into the revenue forecasts mark the first in-depth review of the most important legislation passed each year.

Budget gap

The OLS revenue office projects the state will collect $436 million less than the Christie administration expects over the next 15 months – including $223 million over the last few months of the current fiscal year, followed by $213 million in fiscal 2018, which starts in July.

In both cases, that’s a difference of just 0.6 percent, said Catherine Brennan, section chief for the OLS’ revenue, finance and appropriations section.

“The not so good news is that since we appeared before the committee in December to report midyear weakness in collections, revenues have continued to trail the governor’s certification,” Brennan said.

New Jersey’s revenue performance is mirroring national trends. In the second half of 2016, the majority of states saw a softening of tax collections.

And Brennan said New Jersey isn’t in a bad position compared with its neighbors, as its economy is improving, though at a rate still slow compared with previous expansions.

“We’re actually doing pretty well relative to our peers in the Mid-Atlantic region, and including Connecticut. Probably in the Mid-Atlantic region, the only state that’s currently performing a little bit better than New Jersey is probably Maryland,” Brennan said.

New Jersey’s economy added over 60,000 private sector jobs in 2016, most since 2000, then added another 28,000 in January and February.

Regardless, more than 35 percent of gaps in the funding projections are connected with income-tax forecasts, on top of 38 percent tied with corporation business taxes.

While there is uncertainty for the budget associated with the revenue forecasts, the bigger risk comes from expectations that the state will receive $325 million from selling state assets, such as broadband spectrum owned by its public television station, $215 million from legal settlements over the two fiscal years and $100 million from additional changes to public workers’ health benefits.

The surplus is $493 million – equal to 1.4 percent of what it spends, compared with a national median of around 5 percent. That uncertainty is compounded by the prospect its $14 billion in federal aid may be cut.

The surplus is just 1 percent of its combined federal and state spending, said legislative budget officer Frank Haines.

“That matters” to Wall Street bond rating agencies, Haines said. “One of the things that surplus represents as well as hedges against contingencies, it’s an indication of what the rating agencies like to call liquidity. So how much cash do you have?”

Haines said that in ‘stress testing’ the Pew Charitable Trusts estimated New Jersey’s surplus amounts to eight and a half days of spending.

Scudder said there has been no difference in how New Jersey’s bonds are trading since Moody’s Investors Service downgraded the state’s credit rating again last week.

“I’m not sure what they were at 11 downgrades ago, but what I do know is that in the past six to 12 months, we’ve seen very strong acceptance of our bonds in the marketplace and improving spreads for the most part throughout that time,” Scudder said.

Scudder told lawmakers he didn’t think the recent downgrade would add to the state’s cost for borrowing to make quarterly pension payments, as will be required starting this summer.

New Jersey: Decoded cuts through the cruft and gets to what matters in New Jersey news and politics. Follow on Facebook and Twitter.

Michael Symons is State House bureau chief for New Jersey 101.5 and the editor of New Jersey: Decoded. Follow @NJDecoded on Twitter and Facebook. Contact him at

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