New Jersey’s treasurer delivered bad, but not unexpected, revenue news to lawmakers hoping for a few extra million dollars as they work on a new state budget.
“There is no April surprise. Instead, we have a May reality check, a reality check on the urgent need for new revenues,” said Treasurer Elizabeth Maher Muoio.
Muoio said the current budget will end barely in the black. Gov. Phil Murphy’s proposed spending $37.4 billion, but even a budget with no new spending will sink into deficit without his proposed $1.6 billion in revenue-raising tax increases.
“Without our proposed changes, projections for fiscal year 2019 are on a trajectory for a general fund deficit of $2.4 billion,” Muoio said. “We must take action to correct our serious structural deficit and structural fund imbalance. General fund revenues are simply not keeping pace with our obligations.”
Treasury figures show New Jersey’s gross income tax rising more than 9 percent so far in fiscal year 2018, and growth holding slow but steady in the sales tax. But the corporate business tax tanked with receipts off more than 28 percent, year-to-date.
“Revenue for sports betting will not sustain us. Neither will remote sales. Neither will the gimmicks of the past that were once used to buy time. They have all been exhausted,” Muoio said. “Simply put, we need general fund solutions. Otherwise, everyone must be prepared to get out the red pen and make draconian cuts.”
But several Assembly Budget Committee members raised questions both to Muoio and the nonpartisan Office of Legislative Services. There’s resistance by Democratic leaders to Murphy’s tax increases, including both enacting a millionaire’s tax and restoring the sales tax to seven percent. Assembly Majority Leader Lou Greenwald says it’s pushing people to leave New Jersey.
“We should know who are the class of people that are leaving. What is the revenue to the state, how does that impact our structural stability, and how does that impact the programs the governor is outlining? Because I can tell you there is not an appetite in the state of New Jersey for more taxes. There just is not, and I don’t care who you tax,” Greenwald said.
“Certain members of the Legislature not being in favor of tax increases, but yet spending is starting to creep up a little bit before we even have the budget struck. We’re headed for some sort of loggerhead here, it would seem to me, real soon,” said Assembly budget officer, John DiMaio.
Muoio pointed out most of the new spending would be directed toward education and NJ Transit, both necessary and long-neglected. As for the current projected budget shortfall, Muoio proposed shuffling $788 million into the general fund from the energy tax receipts, that normally go to municipalities, to keep cash flowing into fiscal year 2019. It’s a politically fraught moment.
“I think that raising taxes in general is just a bad message. I know we’ve talked about it for many years now in doing it. But when we also see the economic growth and where it’s at, and we’ve been a little bit stagnant compared to other states, I think that’s a tell-all, as well. We want to make sure that New Jersey stays affordable,” said Assembly budget chair, Eliana Pintor Marin.
Meanwhile, legislative staff is looking at state programs, old and new, trying to prioritize. Pintor Marin says, “It’s forcing us as Democrats to rethink what is really important.”