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TagsBY DEBORAH HOWLETT
COMMENTARY
Today, Governor Christie will have to find a way to close a $10.5 billion structural gap in the state budget he presents to the Legislature.
The shortfall represents more than one third of this year's budget — 37 percent. New Jersey's budget is in worse shape than Texas or California or almost every other state in the nation. According to a study by the Center on Budget and Policy Priorities, only Illinois and Nevada anticipated shortfalls that represent a larger share of their current year budgets.
If all of this sounds familiar, it should.
New Jersey is in almost exactly the same fiscal shape it was a year ago, when Christie faced a $10.7 billion structural gap. He balanced the state budget by putting an end to property tax rebates and slashing state aid to public schools, actions that created more pressure on the exploding growth of local property taxes. Christie also chose to "defer" paying $3 billion due the state's pension fund; raided the state's clean energy account and cut social safety net programs for seniors, the disabled, the poor and the homeless. At the same time, Christie gave corporations and the wealthiest New Jersey taxpayers substantial tax breaks.
Despite all the boasting about turning Trenton upside down, the state's structural gap hasn't gotten any smaller and its revenue outlook remains bleak. It's as if the governor had the state on a strict diet for the past year and only lost a pound or two.
The state's budget shortfall in Fiscal Year 2012 will almost certainly be the same as last year's structural gap, according to most analysis. The administration has yet to make public any of the revenue projections it is using to construct its budget, but tax collections for the past year have been up only slightly. Any anticipated increase in revenues, even under the most optimistic scenario, is unlikely to offset the loss of $1.4 billion in federal stimulus funds the state received.
So, the state won't have more money. Expenses, however, have increased.
The non-partisan Office of Legislative Services, which does fiscal analysis for the Legislature, estimates the FY2012 structural deficit at $10.5 billion, according to a confidential memo obtained by The Star-Ledger newspaper. The report says the state's pension payment will increase to $3.5 billion; schools will be due $2.3 billion more and the state will owe $2.1 billion in tax rebates.
The governor — who once made headlines by saying Governor Jon Corzine should resign in shame over an $8 billion structural budget deficit — has disputed the calculation for the FY2012 budget, calling it a "made-up" number.
But that "made-up number" is the same one Christie used to his advantage when he wanted to explain the magnitude of the trouble he faced in balancing the state's budget last year. A structural deficit does inflate the actual dollar amount of the budget deficit because it includes funding that would be necessary to meet "projected growth."
For example, Christie's budget projected $8.5 billion in "net growth" over and above the $29.9 billion appropriated for the previous year. That means, the state budget would have to grow by 28.4 percent to accommodate such things as inflation, cost of living adjustments, even programs created by the Legislature but not funded by an appropriation.
In a way, the structural deficit is like the sticker price on automobile (complete with dealer mark-up and undercoating). It's simply the high-water mark for negotiations.
For the sake of consistency, let's frame this year's budget shortfall in the same terms Governor Christie used last year. The FY2011 appropriation is $29.4 billion (Yes, despite all of the cutting the governor bragged about, that's only about $500 million less than FY2010). Assuming the same 28.4 percent "net growth," that adds $8.3 billion. Toss in the $500 million annual pension payment that wasn't made and as much as $1.4 billion in lost federal assistance, and the amount quickly approaches $10.3 billion.
And, just like last year, this year's budget likely will be balanced by automatically writing down about $5 billion worth of "projected growth" and inflationary increases that were never going to come to pass. Another $3.5 billion will be saved by once again deferring what the state owes to the pension fund, or perhaps folding it into any pension "reform" legislation the governor proposes. That leaves just over $2 billion to be cut from state programs or paid for with new revenues. It's not a small number. It amounts to the total yearly collections from the Corporation Business Tax.
So, here we are, back in the same place we were last year. It's time for a balanced approach to the budget that doesn't merely shift school aid and property tax relief to tax cuts for millionaires and corporations. It's time for real solutions that correct the imbalance in the structure of New Jersey's tax system so that the state can put an end, once and for all, to the multi-billion dollar structural deficits that continue to plague the state budget year after year.
Deborah Howlett is president of New Jersey Policy Perspective.
