newjerseynewsroom.com

BY TOM HESTER SR.

NEWJERSEYNEWSROOM.COM

As part of his effort to close a projected gap of $924 million in the current state budget, Gov. Jon Corzine announced Tuesday that school districts will have to use $260 million in excess funds the state maintains they have and that they will not receive that amount in expected state aid.

Corzine also said that the latest round of municipal aid that he froze earlier this month will be provided to local governments.

"We also maintained critical funding for charity care and other health care needs, Human Services community providers, and aid to higher education,'' the governor said.

Corzine said the budget cutting is part of his commitment to ensure that the state's $29 billion 2010-11 budget remains balanced as the Christie administration prepares to take office on Jan. 19.

In addition to the $839 million in budget cuts, the plan recognizes additional federal Recovery Act payments to offset costs from the Earned Income Tax Credit program as well as revenues from the introduction of Powerball lottery in New Jersey and a tax compliance effort relating to the recent Internal Revenue Service program regarding income from previously undisclosed accounts held with the Swiss financial institution UBS. These items together total $135 million.

As a result of this plan, spending for fiscal year 2009-2010 will now be $28.6 billion, which, Corzine pointed out, is $220 million less than the amount spent the year before he took office.

The plan does not include an expected $250-300 million in revenue that would be generated this fiscal year by an extension of the income tax surcharge for the wealthiest 1 percent of New Jerseyans — those making over $400,000 per year — that was enacted on a temporary basis in June and will sunset Dec. 31. That option would have mitigated a portion of the proposed reductions, including the school surplus action. Given the Christie‘s administration's opposition, the extension is not included.

Under the proposal to cut school aid, which would require legislative approval, beginning in February, districts would be required to use a portion of those excess surplus balances — totaling $260 million — in place of state aid payments. Since these surplus balances represent funds in excess of those needed in districts' operating budgets.

Corzine maintains substituting the excess surplus balances for state aid payments should have no impact on school district programs, school operations, or local property tax bills.

"Throughout this process we have made property tax relief a top priority, and our plan will ensure that all municipal aid that was budgeted this year will be delivered, including the CMPTRA (municipal aid) payment that was frozen earlier this month," Corzine said.

"Like nearly every state in the country, New Jersey's budget faces dual pressures from the severe national economic crisis — a fall-off in revenue and greater demand for safety net services and related needs such as Medicaid, the state food purchasing program, and the senior property tax freeze," Corzine said. "We have worked hard over the last few weeks to meet this challenge and have identified $839 million in spending cuts across state government."

The 2009-10 budget, signed in June, included more than $15 billion in property tax relief. Corzine said the latest budget cuts maintain his commitment to provide real property tax relief.

Clifton Mayor Jim Anzaldi, president of the New Jersey State League of Municipalities, praised Corzine's decision to free the $20 million in municipal aid.

"He and his team deserve our thanks for this. The plan he announced today will not only close a budget gap of $924 million and allow the state's budget to remain balanced, but it also honors the state's commitment to provide a specific level of property tax funding."

"This restoration of property tax relief funding will help homeowners, especially those already facing unemployment or possible foreclosure," said League Director William G. Dressel. "It should inspire business confidence in New Jersey. And it will serve to bolster the careful plans of local officials, already struggling mightily to serve their fellow citizens in the midst of this recession."

Rich Bagger, co-chaiman of Gov.-elect Chris Christie's Budget and Tax Task Force, commented on Corzine's budget cuts.

"It is belated, but good news that the Corzine administration has come forward with spending cuts that Governor-elect Christie and others have called for,'' Bagger said. "However, there continues to be real risk of a further revenue shortfall in this year's budget. The fact that the Corzine administration plans to push through last minute discretionary spending is cause for significant concern."