New Jersey is awash in cash and the glut is prompting lawmakers to consider more tax breaks.
Two months after releasing already optimistic revenue projections, Treasury and Office of Legislative Services officials are now predicting that New Jersey’s tax revenue will exceed even those optimistic expectations.
The Legislative Office’s collections forecast for the current and future fiscal years is $6.9 billion higher than the Treasury forecast in April and another $3.8 billion above the Office’s forecast no supporter that month.
Treasury officials are even more optimistic, predicting an additional $7.8 billion in recoveries in the current fiscal year and ahead.
Martin Poethke, director of the state’s Office of Revenue and Economic Analysis, told the Senate Budget Committee on Monday that he had “never seen a period like the last two years.”
“The growth rates and the turnaround in revenue forecasts have been staggering,” Poethke said. “My colleagues, state by state, across the country, are seeing the same things.”
Most of the windfall gains are due to state income tax increases, which the Treasury says will bring in $4.9 billion more than Gov. Phil Murphy projected when he was in office. budget speech in March.
But officials warned lawmakers to prepare for a coming economic downturn, noting that sales tax growth suffered a sharp slowdown in April and that quarterly income tax payments paid in April had actually decreased by 24%.
Independent contractors and some small businesses make estimated quarterly income tax payments, while the majority of filers pay income tax through deductions from their paychecks. A decline in quarterly collections signals growing caution among those filers, Assistant Treasurer Aaron Binder said.
“We are in a very good position today, better than anyone could have hoped for 24 months ago,” Binder said. “It’s a good problem to have, but it will clearly serve as a temptation. We have to be aware of the economic news that comes in daily.”
What to do with extra billions
The rising forecast has left New Jersey lawmakers with an enviable problem: They must decide what to do with the billions not already set aside for the upcoming fiscal year’s budget.
Sen. Paul Sarlo (D-Bergen), chairman of the House Budget Committee, suggested that New Jersey’s cash reserves could be increased to $7 or $8 billion. Binder said that range seems “reasonable,” adding that paying down debt and “considering further property tax relief” are priorities.
It is not yet clear what the tax relief or debt components will look like. There are a few likely candidates.
Officials could choose to increase the $6.8 billion pension payment planned by the state and pay more than the $1.3 billion Murphy has proposed adding to a fund used to pay off the debt and save the state money on debt service.
The question of tax relief is less clear cut. Assembly Speaker Craig Coughlin said Monday he wanted something historic.
“We have extra money this year, and New Jersey needs tax relief now. In this year’s budget, I will be emphasizing the largest tax relief program in New Jersey’s history. state,” the speaker said in a statement.
Cecilia Williams, the president’s spokeswoman, declined to provide details.
The tax relief could come from a faster introduction of the Governor’s proposed ANCHOR tax credit program, a $900 million replacement for the still underfunded Homestead Benefit program, and the rebate program for the middle class.
ANCHOR aims to provide eligible homeowners with an average credit of $700 in the first year. The average price would rise to $1,150 by FY2025, when ANCHOR’s funding would peak at $1.5 billion.
No new public hearings
New Jersey lawmakers face annual criticism over what is typically an opaque budget process where decisions are often made in closed meetings between the Senate speaker, Assembly speaker and governor.
While the budget committees of both houses have each held a series of hearings over the past few weeks to allow advocacy groups and members of the public to weigh in on how the state should spend its money, these comments all came before officials predicted the latest revenue boost.
Some groups have already renewed their calls for money to go to their spending priorities.
New Jersey Policy Perspective, a left-leaning think tank, on Monday urged the state to establish a child tax credit and increase earned income tax credit award levels, among other things.
But Sarlo said the public will not have another chance to speak before his committee, noting that advocates have spent weeks telling lawmakers what their spending priorities are.
“We all know what their needs are,” he said. “I think we have enough public comment.”
The influx of funds means lawmakers can avoid the infighting over spending that often colors budget negotiations.
Indeed, lawmakers and the administration appear to be on the same page on most of their issues, but scrutiny of an estimated $3 billion in unallocated federal funds flowing to the state under the plan US federal bailout remains a sticking point in budget talks.
The formulation of the current year’s budget gave the Joint Budget Oversight Committee approval powers over the allocation of most federal funds received by New Jersey, but these passages were notably missing from the spending proposal. of the governor for the coming fiscal year.
Sarlo, Senate Speaker Nicholas Scutari (D-Union) and House Budget Chair Eliana Pintor Marin (D-Essex) each said the language must return.
“They just have to get this back to what it was originally, and that shouldn’t be a problem,” Sarlo said on Monday, adding that both sides were “getting there”.
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