New Jersey's revenues are projected to fall more than $600 million short of what is budgeted for the fiscal year ending next month, the state treasurer said Wednesday, in large part due to income-tax collections missing their marks.
Acting Treasurer Ford Scudder told lawmakers that the Christie administration would fill the hole by shifting money from a number of areas that have underspent and cutting into the projected budget surplus.
As for the next fiscal year, which begins July 1, the administration has revised the $34.8 billion budget Gov. Christie proposed in February, reducing projected income-tax collections by $443 million.
The revised budget - now $34.5 billion - adds revenue from tax policy changes, including delaying a business-tax credit program. It decreases appropriations with more than $300 million in "budget changes" to a variety of programs, according to documents provided by the treasurer's office.
In remarks Wednesday to the Assembly Budget Committee, Scudder singled out the delayed business-tax credits - a change he said would net an additional $135 million in corporation business tax revenues next year - and increasing by $25 million the reduction of state charity-care payments to hospitals.
The administration also will propose legislation to increase income-tax withholding for lottery winners, Scudder said. Under the proposal, he said, lottery winnings above $10,000 would face "immediate withholding" at New Jersey's top income-tax rate - 8.97 percent - instead of a 3 percent rate.
Scudder said the change was "not an increase in taxes owed" but would "ensure that existing tax liabilities are ultimately collected on winnings." It would increase next year's income-tax collections by $25 million, he said.
The administration plans to make scheduled payments into the state pension system, Scudder said.
In spring 2014, Christie announced plans to cut promised payments into the pension system in response to a two-year, $2.75 billion revenue shortfall - a move that spurred a legal battle decided in Christie's favor by the New Jersey Supreme Court.
The projected revenue gap discussed Wednesday was smaller: $1.1 billion over two years, according to the Office of Legislative Services.
Asked Wednesday about the prospect of another drop in New Jersey's credit rating - which has been downgraded nine times by the three rating agencies during Christie's tenure - Scudder said that the state had been increasing its pension payments "meaningfully," and that use of onetime revenue gimmicks had declined.
"I do not believe that a further downgrade would be warranted," he told lawmakers. One factor considered by the rating agencies is how the state withstands changes in its revenue forecast, he said.
Scudder said New Jersey is "far too reliant" on its highest earners, with a progressive tax code that leads to volatility in tax collections.
At an earlier hearing Wednesday, Frank Haines, legislative budget and finance officer, told Assembly lawmakers that volatility was "certainly present" in the revised Office of Legislative Services revenue outlook, and described a weak year in the stock market.
But Haines said projections also had fallen short in withheld income-tax collections - an area that does not necessarily pertain to high earners.
New Jersey is not alone in taking in less revenue than expected. California, Massachusetts, Connecticut, and Pennsylvania have reported spring income-tax collections that fell short of projections, Haines said. He also said April's federal income-tax collections were down from last year's.