The news on the income side of the state’s bank ledger got even worse yesterday, with the Office of Legislative Services (OLS) notifying budget committee members that FY 2012 revenue is $50 million to $100 million below its estimates of just two weeks ago. As New Jersey’s potential shortfall reaches $1.5 billion, will the growing chorus calling to reject any tax cut grow louder?
May revenue collections from the major taxes came in “somewhat” below OLS’s expectations – expectations that were already more than $600 million below the Christie administration’s most recent projections.
The biggest surprise to OLS was the sales tax, which was actually 2.3 percent lower than last May, bringing the year-to-date growth in sales tax to 2.4 percent. In order to reach the administration’s target, sales tax would now have to grow by 8.3 percent in June; to reach OLS’s target, collections would have to increase by 7.2 percent. That’s asking a lot of any month.
Likewise, income and corporate business taxes are showing slow year-to-date growth (2.4 percent and 1.8 percent) and would have to increase at a much quicker pace in June (4.3 percent and 15 percent) if this year’s revenue targets are to be hit.
With the poor May numbers now in hand, OLS says revenue for the current year will be $50 million to $100 million below its forecast from just two weeks ago. If you adjust next year’s revenue for the new projected shortfall, the overall gap could increase between $100 million to $200 million. This could bring the shortfall to a total of $1.5 billion more than the governor originally estimated, and $800 million more than what the treasurer suggested it would be two weeks ago.
To their credit, Senators Codey and Lesniak have already gone on record saying that now is not the time to reduce state revenues. In addition, Assembly Budget Committee Chairman Prieto has repeatedly raised concerns about the validity of the “New Jersey Comeback” and cited the need to be cautious about any revenue reductions.
The politics among Democratic legislators is getting trickier as Senate President Sweeney continues to push a Christie-Sweeney tax cut. What might have made sense in February, when the projected two-year deficit was a more manageable $500 million or so looks increasingly dangerous to the state’s financial health. In March, no one expected that we would have to borrow the money from our kids to pay for our tax cut. Now, the treasurer says that we must.
A true fiscal conservative would never support more borrowing for less revenue in a state still in the throes of the Great Recession. The latest numbers should make fiscal conservatives of Democrats and Republicans alike.
Help us help New Jersey's working families. Make a tax-deductible donation today.