Questions, but less combat, over N.J.'s next budget
TRENTON - For the second consecutive fiscal year, the Christie administration and the Legislature's chief budget officer offered similar revenue projections, portending a smooth budget process even as the governor and Democrats fight over initiatives like a proposed constitutional amendment to mandate pension funding for public employees.
TRENTON - For the second consecutive fiscal year, the Christie administration and the Legislature's chief budget officer offered similar revenue projections, portending a smooth budget process even as the governor and Democrats fight over initiatives like a proposed constitutional amendment to mandate pension funding for public employees.
During much of Gov. Christie's tenure, the state's revenue estimates proved to be overly optimistic, leaving the state to scramble near the end of the fiscal year to balance the budget, as required by the New Jersey constitution.
There was no drama Tuesday during an hours-long Senate Budget Committee hearing. In a Statehouse led by a combative Republican governor and a Democratic-controlled Legislature, even the tone was cordial.
"While I realize the committee has grown accustomed to the silver-tongued oration of my predecessor, I trust that you won't hold it against me if I take a more plainspoken approach," acting Treasurer Ford M. Scudder said, referring to former Treasurer Andrew Sidamon-Eristoff, who was known to spar with Democrats.
Earlier Tuesday, Catherine Z. Brennan of the nonpartisan Office of Legislative Services (OLS) told lawmakers that she estimates the state will take in $160 million less than the Treasury projects over the current fiscal year and the one that begins July 1 - a difference of just 0.2 percent.
Christie's proposed budget for fiscal year 2017 totals $34.8 billion.
Sen. Paul Sarlo (D., Bergen), the committee's chairman, noted that Christie's budget included the standard $1.6 billion for the nearly depleted Transportation Trust Fund but does not identify a funding source.
Scudder acknowledged that the administration doesn't have the authority to borrow more money to replenish the fund, which runs out of money at the end of the fiscal year, and said the governor planned to negotiate a plan with the Legislature.
One idea floated by Sarlo and others is to increase the state's 14.5 cent-per-gallon tax on gasoline to bolster the trust fund, while simultaneously passing legislation to phase out New Jersey's estate tax over five years.
New Jersey is one of two states, along with Maryland, that impose both an estate and inheritance tax. The threshold at which New Jersey starts taxing the estate of those who die is $675,000 - the lowest among the 16 states that impose the levy.
Fewer than 5 percent of deaths trigger an estate tax liability, according to OLS. Scudder described it as the "most egregious estate tax policy" in the country, and praised Sarlo's legislation.
"That's what we work for, is to pass money down to our offspring," Scudder said. "That's what we're all on this earth for."
Some lawmakers wondered how the state would make up for the projected $550 million in lost revenue that OLS says the estate tax phase-out would yield.
"The inheritance taxes are among our strongest-growing taxes right now, and our other major taxes are not growing at the same rate," Brennan said.
She added, "Currently deaths are pretty steady," between 70,000 and 72,000 a year in New Jersey. Some lawmakers argued that reducing the tax burden would induce residents to stay or come to New Jersey, offsetting the lost revenue through other economic activity.
The state's income tax accounts for 40 percent of its revenue base "and relies on less than 1 percent of taxpayers for nearly one-third of that revenue," Frank Haines, another OLS staff member, told lawmakers.
Both Haines and Scudder noted that the state's wealthiest citizen, hedge fund manager David Tepper, recently moved to Florida. Tepper, worth $10.6 billion, also reorganized his business to Florida, Bloomberg reported. "We may be facing an unusual degree of income tax forecast risk" as a result, Haines said.
Another issue that could have negative ramifications for the budget is a case pending before the state Supreme Court. Public-sector unions and a group of retired prosecutors, in a lawsuit against the state, have asked the court to restore their cost-of-living-adjustments, which were frozen in 2011 as part of a broader overhaul of the pension and health benefit systems for workers.
Scudder said that the administration anticipated a favorable ruling and that it didn't have a contingency plan in case the state loses. It's "very unclear what sort of ruling that would look like," he said.
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