Saturday, March 13, 2010

New Jersey Budget Still $400+ Million In Red

State Treasury officials are hoping that the tax revenues from next month will help close the budget deficit, but the state continues to see revenues lag projections. That means that budget cuts are going to be critical to closing the deficit.
That meant no immediate changes to the major cuts Gov. Chris Christie made in February to cover an expected $1.2 billion lag in budget revenue.

"It’s not a game-changer," Christie spokseman Michael Drewniak said. "We have a few more months to go, and there’s still volatility to be considered in the coming months. It’s basically tracking along our projections."

April’s income tax collections are the big factor toward getting the money to pay for what was a roughly $29 billion budget that runs through June. On Tuesday, Christie is scheduled to lay out his budget for the next fiscal year.

February collections were $1.75 billion, which was $41.5 million, or 2.3 percent, off the mark. For the first eight months of the fiscal year, revenues are nearly $16.6 billion, just below the $17 billion that was expected.

Income tax — the state’s biggest revenue source — was 12.7 percent over what was projected in February. Treasury officials said that could be attributed to the expiration of a tax on high earners.

Clever high-earners might have deferred their bonuses until after December, when the state’s highest income bracket went from being taxed 10.25 percent to 8.97 percent, though there is no direct evidence of that, said Andrew Pratt, a spokesman for the Treasurer.

The same effect was not seen in January, when income tax collections were about what had been projected.

For the full fiscal year, sales tax revenue has been below expectations as consumers held back on big-ticket purchases such as cars.

The projections are estimates cemented every summer used to guide the state’s spending habits for a balanced budget. The state realized early on that they underestimated the effect the recession would have on revenue.
Revenue projections that are hundreds of millions of dollars off shows just how crazy the state spending is - instead of conservatively estimately revenues and matching spending accordingly, New Jersey and many other states proceeded as though the recession would pass them by. It was spending in denial of the fiscal realities of a recession and lower revenues and taxpayers incapable of filling the gap with higher taxes and fees because deficits are at record levels around the nation.

That's left massive deficits in its wake and it doesn't even touch on other structural deficits, including the severely underfunding pension funds.

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