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State government faces total budget deficit of $10.9 billion
BY TOM HESTER
NEWJERSEYNEWSROOM.COM
FOURTH UPDATE
Members of the New Jersey Assembly Budget Committee Monday gathered to learn the depth of the state government's fiscal situation and they they got a forecast as gloomy as the weather outside the Statehouse windows.
In the next five months, legislators and the Christie administration must confront a deficit in the current 2009-10 New Jersey state budget that is expected to grow by June to nearly $2 billion and a 2010-11 budget deficit of $8.9 billion. Both budgets must be balanced by June 30.
David J. Rosen, budget and finance officer for the non-partisan state Office of Legislative Services, told legislators that 2009 was the worst in modern state government history for tax collections with overall revenue down 12 percent.He said it was also the worst year for income tax collections with revenue down 18 percent, and the worst year for sales collections with revenue down 14.8 percent.
As Rosen was giving legislators the bad news, Gov. Chris Christie told reporters he will have to allow a tax hike on business to take effect if the federal government doesn't help the state fund the unemployment fund.
Employers could see an increase of up to $1,000 per worker in their unemployment tax as of July 1 unless federal aid arrives. Businesses taxes are increased by law when the unemployment fund falls below a certain level in March. Christie said the fund will be $1.6 billion in debt by March.
Continuing with the grim statistics, Rosen said reality tax revenues was down 40 percent, the corporate business tax revenue down 25 percent, insurance taxes revenue down 16 percent, casino revenue down 14 percent, inheritance tax revenues down down 9 percent, and motor fuel tax revenue down 5 percent. He said tax revenue could go even lower this year.
"In 2011, let's say we have a real recovery,'' Rosen told the committee, "it will take until 2014 to get back to where the state was in 2008. It is going to be very hard for us to simply grow out of this problem. We have taken such a revenue hit in the last two years that it is going to take up to multiple years to get back to where we were in terms of a state revenue base. It is going to have a profound impact in the years going forward.''
Rosen said possible solutions to solving the nearly $2 billion 2009-10 budget deficit could include raising $1.8 billion by using reserve funds, federal aid and a tax amnesty program that could bring in more revenue. He also said an additional $2.5 billion could be found by budget cuts, and delaying pension contributions and school aid.
Rosen said the Republican Chistie administration and the Democratic-controlled Legislature face an $8.9 billion 2010-11 budget deficit caused, in part, by the end of temporary tax increases that raised $1.1 billion, a $1 billion decline in tax revenue, the lose of $2.2 billion in federal aid, a state pension contribution obligation of $3 billion, a $600 million increase in school aid, and a $1 billion cost of funding mandated Homestead Rebate programs.
Michael Drewniak, the governor's spokesman, said of the hearing, "The non-partisan Office of Legislative Services today confirmed what we've been saying all along — New Jersey is confronting a budget deficit of approximately $1.3 billion for the balance of the fiscal year. There are no phantom surpluses or face-saving magic numbers to fix the mess we have inherited. Now is the time to move forward and focus on tackling this very real problem head on."
With the new Christie administration blaming the former Corzine administration for the state's fiscal problems, Assemblyman Louis D. Greenwald (D-Camden), the Budget Committee chairman, stressed as he did at last year‘s budget hearings, that New Jersey's problems are part of a nationwide economic downturn.
He stressed that while Rosen's statistics paint a grim picture, there is always hope the economy will turn around.
Following the hearing, Greenwald said, "We've heard a lot over the last week about where the budget stands, but after today's testimony this much is clear — budget revenues, as they are every month and every year, are tenuous, but by June 30 the budget will be in balance as required. Sparring over budget estimates is the type of politics New Jerseyans have rejected. This is the time to work together to find solutions to benefit all New Jerseyans.''
Republican Budget Officer Joe Malone (R-Burlington) asked Rosen to compile a list of funds that could be used cut as the Legislature grapples with a $2 billion hole in the state's current budget.
"Our state faces grave financial problems that we cannot ignore for another day," Malone said after the hearing. "We need solutions and we need them now. The problem worsens every day we wait."
Malone said legislators need solutions from a nonpartisan source so that the partisan politics of the past do not hinder the new administration and Legislature. Malone said his request would strictly be budget analysis to help lawmakers make future policy decisions.
"Dr. Rosen provided some hope that April's income tax collections may exceed expectations, but he said they are just as likely to underperform," Malone said. "No matter what happens, no one can deny that we have a significant problem that requires immediate bipartisan attention with all options on the table — even those that are not politically palatable or expedient. "While we all hope for the best, we must be prepared for the worst and willing to work across party lines."
The committee also heard from municipal officials about the effect of the New Jersey's fiscal problems on them.
Clifton Mayor James Anzaldi, the president of the New Jersey State League of Municipalities, asked legislators to confront state mandates and binding arbitrations for municipal employee contracts, two matters he said cost local government money.
"I've been in government for 40 years and have never seen a time like now,'' Anzaldi said of local government fiscal problems. "Last year, Clifton had to terminate employees and demote police officers. We cut municipal hours and there is less staff in every department. It's a real problem at the local level.''
Anzaldi said contract arbitrators continue to award 4 percent pay hikes "when senior citizens not getting increases in social security.''
He said, "If we can do something at state level to make some temporary time when there could be no raises for a period of time for all public employees that would be helpful to the cities,'' Anzaldi said. "If something could be done about mandates and binding arbitration, that would also be helpful. School costs are another area where the assembly and Senate could come together. We have to realize this is the worst economic time since 1929.''
Greenwald said he wants to continue to obtain insight from local officials as the Legislature attempts to confront budget problems.
Assembly Speaker Sheila Y. Oliver (D-Essex) called for the unusually early budget hearing and sat in on the session.
