N.J. revenues keep pace with projections

New Jersey is on target to meet its revenue projections for the fiscal year that began July 1, but the ghosts of budgets past are firm reminders that much can change in the months ahead.

Reports released last week by the Legislature's budget office and the state Treasury Department show that through October, major revenues grew 5.6 percent over the same period last year.

That's on track with what the nonpartisan Office of Legislative Services says the state must achieve to meet year-end projections, and ahead of the 5.2 percent growth rate that Gov. Christie's administration has targeted.

Among the major revenue sources, gross income tax and corporation business tax receipts are exceeding annual growth targets, while revenues from the sales tax, lottery, and casinos are lagging.

Accurately forecasting revenue growth has proved tricky for the Republican governor, who is considering running for president in 2016.

State Treasurer Andrew Sidamon-Eristoff acknowledged in a statement that "we are only a third of the way into the fiscal year and remain mindful of the potential for volatility with respect to some of the major revenue categories going forward."

Failure to match optimistic projections has resulted in trimmed payments into public workers' pension funds and delayed property tax relief for homeowners. Wall Street ratings agencies have also cited the unmet projections in their downgrades of the state's credit.

Downgrades can raise the cost of borrowing, in this case for taxpayers, because investors demand a greater return for what is seen as a riskier asset.

Both Standard & Poor's and Fitch Ratings downgraded New Jersey's general obligation bonds from A-plus to A in September, with Fitch citing the "absence of long-term, fiscally sustainable solutions to close identified budget gaps in fiscal years 2014 and 2015."

Assemblyman Gary Schaer (D., Passaic), chairman of his chamber's budget committee, noted that the state has a surplus of just $300 million, or less than 1 percent of the $32.5 billion budget.

"Last year we utilized every penny of it and then some," Schaer said Tuesday. "I have marked concern, admittedly, in terms of the fiscal forecasts of the state."

Last fiscal year, Christie revised revenue projections downward in February by $250 million. Then a $1 billion shortfall opened up in the spring, when state income tax receipts fell below expectations, which the administration attributed to changes in federal tax policy.

That created a $1.75 billion budget gap for the current fiscal year.

To cover the shortfalls, Christie slashed payments to the pension system for public workers below what the law requires of the state.

Public-sector unions are challenging the cuts in court, leaving another budget wild card looming. Instead of budgeting the full $2.25 billion payment for fiscal 2015, Christie obligated just $681 million.

He vetoed tax hikes proposed by the Democratic-controlled Legislature that were designed to help fund the pension payments.