Christie's 'Jersey Comeback' Stalled by Revenue Shortfall

New Jersey Gov. Chris Christie's "Jersey Comeback" will need a comeback of its own now that a shortfall in state tax revenue threatens to upend his bold predictions that the economy will grow enough to pay for across-the-board income tax cuts next year.
by | May 16, 2012

By John Reitmeyer and Melissa Hayes, The Record (Hackensack N.J.)

HACKENSACK, N.J. -- New Jersey Gov. Chris Christie's "Jersey Comeback" will need a comeback of its own now that a shortfall in state tax revenue threatens to upend his bold predictions that the economy will grow enough to pay for across-the-board income tax cuts next year.

Revenues are still mildly ahead for the year, but they fell 5 percent below budget estimates for April -- casting a shadow over the optimistic spending plan that Christie laid out with bravura three months ago when he promised not only to expand programs in the new fiscal year but also to launch his 10 percent income tax cuts.

All of that, Christie said, was based on an anticipated 7.3 percent boost in the state economy -- a pace far ahead of what any other governors in America had predicted for their states.

But Christie didn't talk tax projections or tax cuts Tuesday when he showed up at an event in Camden. And he would say nothing about a troubled deal with Democrats in the Legislature, some of whom are looking for a compromise that would ease the sting of New Jersey's high property taxes.

April's revenue report is crucial because the state relies heavily on income tax payments filed that month. And those tax collections are a critical indicator for the economists who build the projections that politicians use to support their upcoming budgets.

"While I would like to share in the administration's unbridled optimism, as it does make for great sound bites, these numbers paint a picture that our economy still has far to go," said Senate Budget Committee Chairman Paul Sarlo, a Democrat.

"This isn't a mere speed bump. In our trip to the comeback, we've found ourselves stuck in the mud somewhere in the swamps of Jersey," he said.

The state Department of Treasury announced Tuesday that overall tax collections lagged behind budget projections by $230 million, with only May and June left in the current fiscal year. Overall, there was modest growth, about $500 million in income, sales and corporate taxes over the past 10 months. But despite that growth, the revenues failed to match the predictions Christie made last year for the state economy.

Yet Christie is calling for an income tax cut in the $32.1 billion "Jersey Comeback" spending plan he proposed in February. That budget calls for a more than $2 billion increase in spending based in part on more than 7 percent revenue growth. And the administration predicted that 7 percent would come after saying the state's economy would grow this year -- growth not yet matched by actual tax collections.

Democrats are also paying close attention to the state's evolving revenue picture because they have proposed a credit tied to property tax bills for the new budget as a counter to Christie's proposal.

Senate President Stephen Sweeney, a Democrat, has been in talks with the governor on a compromise that could merge that credit with Christie's income tax proposal.

"I honestly feel that the people of the state of New Jersey need their taxes cut," Sweeney told reporters after an event in Camden he attended with Christie on Tuesday.

"It's tough times. I'm not going to rule out a tax cut until I've got all the numbers," Sweeney said. "We have to see what the May numbers are. April is important, but so is May."

In the Assembly, Democratic leaders are sticking with their own tax proposal, one that would provide a bigger credit for homeowners than Sweeney's, thanks partly to an increase in the tax rate for those earning over $1 million in income.

And although Sweeney and Christie were close to announcing a deal on Monday before Sweeney backed out of a planned news conference, Assembly Democrats made it clear they were not involved in those negotiations.

Any tax plan will have to win approval in the Assembly, and all of the issues involving tax policy and the budget must be resolved before July 1, the state's constitutional deadline for a balanced budget.

"We must move forward responsibly, and that means doing so with a reliable property tax relief plan premised on economic fairness and significant help for the middle class and senior and disabled citizens," said Democratic Assembly Speaker Sheila Oliver.

Christie appeared at the same event with Sweeney, but he did not take questions from reporters afterward. His news office, meanwhile, urged reporters to focus on the two remaining months in the budget year, as well as revenue gains made in the previous budget year.

The only official statement from the Christie administration Tuesday came from Chief Economist Charles Steindell, who focused on a roughly $500 million improvement in tax collections for the state from this time last year.

"While April's revenues were somewhat below expectations, reliable indicators show that New Jersey's economy continues to grow," Steindell said. "Economic growth has brought in more revenue for the state in fiscal year 2012 than in 2011, which is a good sign for the future."

But the poor performance in April leaves New Jersey with $19.3 billion in revenue heading into the last two months of the budget year, while Christie had projected more aggressive tax collections of nearly $19.6 billion at this point.

The gap is only about 1 percent, but Christie will be forced to cut spending, dip into surplus funds or do something else to balance the current $29.7 billion budget before the fiscal year closes on June 30, unless tax collections turn around in May and June.

State Treasurer Andrew Sidamon-Eristoff is scheduled to provide lawmakers next week with a more detailed revenue picture for the current budget year and for the one that begins July 1.

(c)2012 The Record (Hackensack, N.J.)
Visit The Record (Hackensack, N.J.) at
Distributed by MCT Information Services


More from Finance