Democrats Fear Nearly $1 Billion Shortfall After Gloomy April

Seven weeks ago, Christie administration officials expressed confidence that state revenues would surge this spring, enabling the state to hit its income tax target, exceed its original corporate tax estimate, and prove that New Jersey could afford the 10 percent income tax cut that Gov. Chris Christie was proposing.

Yesterday, the Treasury Department's release of the much-anticipated April revenue figures sent shock waves through the legislature with its acknowledgement that state revenues are running $230.3 million below expectations, with just two months to go in the fiscal year.

Just one day after Christie and Senate President Stephen Sweeney (D-Gloucester) reached apparent agreement on a compromise tax cut proposal, lower-than-expected income and corporate tax collections led legislators to question whether the state should go ahead with any tax cut at all.

"This isn't a mere speed bump," Senate Budget Committee Chairman Paul Sarlo (D-Bergen) said after discovering that state revenue collections actually declined over the previous April, which is the most important revenue month of the year because it includes state income tax returns for the previous year.

"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," Sarlo said, adding that the Treasury report shows that rather than being on the road to the "New Jersey Comeback" that Christie is claiming, "we've found ourselves stuck in the mud somewhere in the swamps of Jersey."

Like Assembly Majority Leader Lou Greenwald (D-Camden) did the day before, Sarlo said the new revenue numbers could translate into a total $1 billion shortfall over the next 14 months. This estimate is based on earlier projections by David Rosen, budget director for the non-partisan Office of Legislative Services, that the Christie administration's revenue projections for the current and upcoming fiscal year were already inflated by $537 million.

Christie spokesman Kevin Roberts warned in an email to reporters that "the urge to hastily generalize a single month's report over the remainder of the year would paint an incomplete picture at best. Broader economic indicators continue to point to an upward trend in long-term economic activity and growth for New Jersey, including strong wage figures."

But Rosen, the OLS budget director who was attacked by Christie for projecting that state tax collections would come in $145 million lower for the current fiscal year and $392 million lower next year, said the shortfall was clearly serious.

"Through the end of April, the major tax revenues are growing at approximately half the rate necessary to reach the Executive's budgeted target of 4.8 percent growth in the current fiscal year," Rosen warned. "In particular, gross income tax and corporation tax revenues declined compared to last year during the crucial April tax payment period."

The problem is not only that the fiscal year ends June 30, but also that Treasurer Andrew Sidamon-Eristoff projected a surge in growth from March through June would rescue his original budget projections, and both the March and April numbers have now come in below expectations.

Rosen said the drop in the corporate business tax, which is notoriously volatile and hard to predict, was the biggest shock. Corporate business taxes came in at $463 million in April -- which was $84 million less than the $547 million collected the year before. That put corporate business tax collections for the first 10 months of the year at $1.786 billion, down $141 million from the $1.927 billion that Treasury expected to collect at this point.

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