Dealing with a $10 billion revenue shortfall is not going to be easy. Even before Wednesday’s projections, the Murphy administration was making some financial moves — like freezing close to a billion dollars in state spending, and forgoing the requirement that the budget maintain a rainy day surplus.
State Treasurer Elizabeth Maher-Muoio says those steps help, but only somewhat.
“This is clearly our rainy day now. Fortunately we had a surplus that had been built up over the past two years. It still was far less than what other states had, but it is coming in handy at this point,” she said “But it will not be enough to continue business as usual in terms of budgeting.”
Things really unraveled for the state in April as tax revenues fell off a cliff. That’s partly because the state extended the tax filing deadline until July.
“Our quarterly estimated taxes are also down for income tax, which shows that we have some reason to be concerned that we will also be seeing a decline in the baseline revenues ignoring the delay in tax payments,” Maher-Muoio said.
Treasury doesn’t know how much of that revenue could rebound later in the year, especially now that more than a million New Jersey residents aren’t working and are collecting unemployment. On Thursday, the Labor Department announced that nearly 70,000 additional workers filed for first time jobless claims.
And while some businesses are reopening, the outlook for corporate tax revenue is a bit of a wild card too.
“We have seen now five months in a row of declines so that gives us cause for concern that we probably won’t be making that up come July 15,” the treasurer said.
Murphy has been looking for other ways to bridge the revenue gap. He’s asked state lawmakers for emergency borrowing powers, but that request hasn’t been granted. And his ongoing pleas for more help from the federal government have gone unanswered.
So that leaves the options that no one likes: higher taxes or cuts to programs. The state has been down this road before, and not too long ago.
“New Jersey’s unfortunately been in this predicament before. Usually it takes some of a combination of spending cuts. Corzine put workers on furlough. Christie cut education funding and also cut pension contributions,” NJ Spotlight budget and finance reporter John Reitmeyer said.
On that subject, Senate President Steve Sweeney told the editorial board of NJBiz that nothing is off the table.
Sweeney has been focused on potential cost cuts like government worker furloughs. His Republican colleague Sen. Steve Oroho believes there are plenty more opportunities to find efficiencies.
“If you are going to ask New Jersey residents to pay anything more, or ask New Jersey businesses to pay anything more, you have to show that you’ve taken all the steps that you know there’s nothing left to do. It’s like the last resort. And I don’t think we’re even close to that,” Oroho said.
So in many ways the upcoming battle over the state’s revenue-challenged budget will play out much as it has in the past. But this time, the stakes are much higher.