With nearly a third of the 2013 fiscal year complete everyone, including the administration, recognizes that there will be a budget shortfall. What we don’t know is the magnitude of the shortfall, and the consequences it could have on New Jersey’s fiscal picture.

Here’s what we do know:

The total FY 2013 shortfall could range from a low of $265 million, assuming the administration’s revenue estimates are achieved (an highly unlikely scenario), to a high of nearly $1.6 billion, assuming that FY 2013 revenue grows at the same rate as last year, 2.9 percent.

With growth flat so far this year, even the assumption that revenue will grow at 2.9 percent may need to be re-evaluated if collections do not improve. For every 0.1 percent that revenues drop below 2.9 percent, New Jersey would lose nearly $30 million in revenue, which would only add an already huge shortfall.

These estimates do not include potential shortfalls in other revenues. According to the Office of Legislative Services, energy taxes may come in $40 million short, while the $200 million of dedicated housing funds diverted by the budget will also come up short, since $40 million to $60 million of that money has already been spent by municipalities. All $200 million could be in jeopardy if the administration loses its court battle over the diversion.

In addition, in its most recent bond disclosure documents the administration pointed to other issues that could result in higher spending than the budget permits, thereby cutting into what’s left of the surplus.

Under New Jersey’s constitution, the state must not only adopt a balanced budget; it must also maintain a balanced budget through the year. This does not mean that the state must maintain the surplus that was budgeted, although some sort of surplus must be kept. In other words, until the combination of revenue shortfalls and higher spending exceed the $648 million surplus in the budget as enacted in June, there are no constitutional issues.

Each administration since 2001 has had to deal with mid-year budget shortfalls. The governor’s office, the treasurer, the Office of Management and Budget, and other departments have probably started meeting to lay out options against different scenarios to balance this year’s budget. The big problematic issue is if the administration underestimates the shortfall and then is surprised in April by lower-than-expected income and corporate taxes. That late in the year, options are few and drastic since most of the spending has already occurred. Maintaining a significant estimated surplus that could offset at least some of an April surprise – or having some other option in the back pocket – is always important.