The Office of Legislative Services released a report this morning stating that New Jersey’s state government revenues for last fiscal year were $253 million short of the Christie administration’s projections. Last month OLS said the FY2012 shortfall was $542 million.
Good afternoon, Lt. Governor Guadagno, Senate President Sweeney, Speaker Oliver, and all the members of the Legislature. I take my constitutional powers and responsibilities seriously, as I know you do. When there are pressing matters that I believe must be addressed, it is my responsibility to call our Legislature into special session.
Giving the certainty of tax relief to our citizens and making our state more competitive with our neighbors in job creation—today—will allow us to put more New Jerseyans back to work this summer. What could be more important for us to do today?
I know it’s been a long year and I know over the last few weeks each of you have been working hard to bring this legislative session to a successful conclusion. We did many great things together. But there is one greater thing left to do—lock in tax relief today that will help to create new jobs tomorrow.
Amends Budget to Restrict Spending to Lower Levels than FY2008 and FY2009 Budgets, Provides Sound $600 Million Surplus
Press Release
Trenton, NJ – For the third year in a row, Governor Chris Christie today signed into law a constitutionally balanced budget that delivers on key priorities for the people of New Jersey without raising taxes. The Governor’s Fiscal Year 2013 Budget as enacted spends $31.7 billion, which is lower than the Governor’s originally proposed budget as delivered in February 2012 and lower than the budget passed by the Legislature. This year’s budget continues the return to fiscal discipline and controlled spending, while focusing on funding critical priorities that speak to the needs of all New Jerseyans. The Fiscal Year 2013 Budget is smaller than both fiscal years 2008 and 2009, while still increasing aid to schools to the highest level of state spending on K-12 education in the state’s history.
Governor Christie said, “The budget the Legislature sent me violated two core priorities of this Administration – it denied tax relief to our hard working, middle-class families while proposing an $800 million tax increase and rejected fiscal responsibility by including millions in new spending that threatened to undo the hard won progress of the last two years. I am unwilling to surrender the gains we have made to establish fiscal responsibility in the state budget by raising taxes on our people at a time when they need and deserve tax relief. The budget I am signing today reverses irresponsible funding decisions, establishes funding levels based on realistic and responsible revenue assumptions, and increases our surplus to a healthy level that paves the way for continued economic growth.”
“The revised budget I signed today would continue to fuel the New Jersey Comeback if it included immediate tax cuts for New Jerseyans. After two hard years of shared sacrifice we’re no longer on the brink of fiscal catastrophe. Because of the tough and difficult choices we’ve made, this year’s budget allows us to make an unprecedented commitment to education, make one of the largest pension payments in our state’s history and fund critical programs that protect our most vulnerable,” said Governor Christie.
Governor Christie put Corzine Democrats on their heels by vetoing $361 million in unnecessary or unsupported spending that threatened to reverse the renewed fiscal health, economic growth and investment of the last two years. In addition to piling on new spending in the budget, Corzine Democrats tried to circumvent the tough choices required to meet a balanced budget by passing additional spending bills outside of the process. As Governor Christie has repeatedly said, spending needs to be accounted for as part of a comprehensive budget plan.
“This spending as usual is just more of the same mentality that plagued the eight years before I became Governor when there was reckless spending and a cycle of raising taxes and fees every 25 days. We cannot go back to the old way of doing things which got us into a fiscal mess in the first place. Corzine Democrats need to realize that they cannot add millions of dollars in spending outside of the budget when every homeowner, student or family faced with financial choices is spending within their budget,” said Governor Christie.
As a result of Governor Christie’s actions, the budget signed into law today maintains a sound, responsible surplus of over $600 million – more than double the Fiscal Year 2013 projected ending fund balance from the Governor’s originally proposed budget and exceeds the levels in the budget as passed by the Legislature. This sound surplus and the fact that the Administration aggressively manages government throughout the year is a signal that the state’s fiscal health is on strong footing.
Governor Chris Christie took his tax fight to a standing-room-only town hall crowd in Brick Township (Ocean County) yesterday afternoon.
And at that Brick gathering, my dear Save Jerseyans, we caught a welcome glimpse of the no-nonsense style of politics that quickly transformed Chris Christie into a national figure; you’ll likely remember his viral warning to beachgoers in the run-up to Hurricane Irene:
Surely, the contrast between Christie and Corzine in Election ’09 couldn’t have been clearer. I was proud to have been one of his earliest and most vocal grassroots supporters. I still am.
But what is our state party’s winning contrast with the liberal legislature right now in this ongoing budget fight?
Governor Chris Christie has taken to the town hall stump declaring that the Corzine Democrats are back.
“In the last couple weeks, we’ve seen an ugly type of Democrat start to rear its head again,” Christie said during a town hall last week. “I think you thought you had slayed this type of Democrat in 2009 — that you had taken the wooden stake and out it through this type of democrats heart. But I am here to tell you today that I fear this type of Democrat has returned to the state legislature. You know what kind of Democrat I’m talking about: A Corzine Democrat.”
The governor will likely expand on the Corzine Democrats theme at his town hall meeting in Brick this afternoon, as he did last evening in his statement about the budget passed by the Democratic State Legislature yesterday:
“With today’s budget, Corzine Democrats reversed course and sent a loud and clear signal that they want to go back to the eight years prior to my administration when taxes and fees were raised every 25 days. After two years without raising taxes, the only way to feed the Corzine Democrats’ obsession is to hold tax relief hostage. I will not allow New Jersey to go back to the same failed policies that nearly put our state over a fiscal cliff. Tax relief for our hardworking families is long overdue and that is exactly what I will continue fighting for.”
But the budget the Democrats passed doesn’t raise taxes once every 25 days. It doesn’t raise taxes any day. It also doesn’t reduce income taxes as Christie’s budget proposed. Nor does it reduce property taxes as the proposal that Senate President Steve Sweeney reneged on would have done.
The budget that the Democrats passed spends $400 million less than the budget Christie proposed.
Christie’s budget would have increased spending 8% with a phased in 10% income tax reduction. It relies heavily on one shot gimmicks and increased borrowing. Christie’s revenue projections, which the Democrats have acceptted, are based upon extremely optimistic assumptions that seem to have little grounding in reality. New Jersey’s economy would have to suddenly start growing faster than the rest of the country in order for Christie’s revenue projections to come close. That sounds a lot like the fiscal cliff that the Whitman/DiFranceso/Bennett Republicans drove New Jersey over in the 1990’s until New Jersey voters kicked them out of power in 2003.
The Editorial Board of the Monmouth and Ocean Counties paper of record actually met with local mayors! Call that progress. MMM criticised the APP editorial board last month for sitting down with Newark Mayor Cory Booker for no reason other than to boost Booker’s statewide name ID when they, until yesterday, hardly, if ever, meet with local mayors.
Middletown Mayor Tony Fiore and Long Branch Mayor Adam Schneider met with the Neptune Nudniks on Wednesday, at the behest of the League of Municipalities. The mayors’ purpose was to bring attention to the State’s decades old practice of keeping the energy receipts tax that public utilities pay.
In energy receipts tax has been in existence for decades. It was originally set up in lieu of property taxes to compensate municipalities for the utility infrastructure rights of way. The tax used to be broken out on your utility bill. It was paid by the utilities directly to the municipalities.
In 2002, during the McGreevey administration, the State started collecting to tax. We all know what happens to money when to goes to the black whole of Trenton for redistribution. Much of it disappears and the intended recipients get shafted. Think Unemployment Insurance Fund and Transportation Trust Fund.
Fiore told MMM that the League sued McGreevey to get the money but the State just turned around a reduced State Aid by a commensurate amount.
Fiore, Schneider and the League now want that money back. It’s not coming, according to what State Treasurer Andrew Sidamon-Eristoff told the APP, “At this time we do not have the financial flexibility to make discretionary adjustment” to provide more from energy taxes.
Fiore told MMM that the energy receipts tax would have provided $4 million dollars to Middletown Township in 2011. That would have saved the Library surplus the Township relied on, prevented layoffs and cleaned up a few snow storms.
What burns Fiore is not just the $4 million that Middletown didn’t collect from the utilities. It’s the $1.5 million hit the Township continues to take in reduced State Aid from 2009 levels. “We wouldn’t be increasing property taxes 1.97% this year if our Aid was restored,” said Fiore, “give us our $1.5 million back and I can reduce taxes by 2%. The Board of Education got all of their Aid restored, yet they are still raising taxes.”
Schneider told the APP that not receiving the energy receipts tax is costing Long Branch “several million dollars.”
The fiscal crisis in New Jersey’s governments and schools will continue through 2017 as a result of a $13 billion revenue shortfall, ($8 billion on the state level, $5 billion on the local, county and school levels combined) according to a report, Facing Our Future, released by the Council of New Jersey Grantmakers. (CNJG)
The report says New Jersey will face a gradual cut in government services of 20%. Increased classroom sizes, from 22 to 28, less police officers and the elimination of services all together.
CNJG recommends solutions we have all heard before. Shared services, consolidations, more county government and less municipal government, county administration of schools.
One thing that is not clear from the write-ups. $7 billion of the $8 billion state revenue shortfall will be pension contributions negotiated by Governor Christie and the Democratic legislature in last years “landmark” pension and benefit reform bill.
One solution not recommended in the report….break the government employees unions’ control of our government.
In 2010 the unions said no to give backs. Thus, New Jersey suffered increased class sizes and police layoffs in our cities. Crime continues to rise in Newark and Camden, but our elected officials can’t do anything about that because the unions control how many police officers can be hired given the money available to pay them.
New Jersey pays unemployment benefits to laid off police officers not to patrol the streets of our cities, while the high paid officers who kept their jobs do the best they can. There are less extreme examples of needless service cutbacks throughout the state.
Practically speaking, there is no question that New Jersey’s public employees control the government. Not the people. Not the elected officials.
New Jersey’s fiscal crisis could be solved easily if the law of supply and demand were applied to the labor market for government workers. Until that happens, if it ever happens, we will continue to pay more for less.
It doesn’t matter how we restructure government so long as the employees are in charge.
To hear the Governor’s critics tell it, New Jersey’s high income tax rates have no effect on our economic health. To them, the income tax can be raised without consequence to our economy, while reducing rates yields little or no benefit.
New Jersey’s business leaders- the entities responsible for employing the vast majority of the state’s workforce- disagree, however.
The New Jersey Business and Industry Association, representing 21, 500 businesses of all types in the Garden State, lauds the Governor’s proposed 10% reduction in the income tax as “the best thing you can do for taxes”. Noting that the majority of businesses file under the personal income tax rather than the corporate income tax, NJBIA says the proposal will give savings to “80% of the business community”.
More telling, however, is what individual small business owners and operators are saying upon learning of the Governor’s proposal.
“It signals your government is working with you, and that you’ve got government at your side at a tough time,” says a proprietor of a Hoboken print shop.
“I believe it to be a proposal that, in fact, could significantly alter New Jersey’s favorability rating, in terms of being a destination of choice,” said the president of a Linden-based manufacturing outfit.
Republican legislators join the Governor’s call for an income tax reduction because we trust the real world experience of job creators. Who better to help guide New Jersey on a path toward sustainable, good paying jobs than the people who do the hiring?
Democratic critics are putting their faith in higher taxes, more spending and bigger government as the solution to the problem. If history is any indication their trust is misplaced, given that the exponential increase in state spending, taxes, and debt we saw from 2002 through 2009 coincided with the loss of 150, 000 jobs.
Coincidentally, these are the same Democrats who raised taxes on middle class families repeatedly during those years, taxing everything from utility bills and car tires to gym memberships and home ownership. Their credibility on helping the middle class is suspect at best.
Smart income tax policy is good jobs policy, and New Jersey is currently at a severe disadvantage in a competition for jobs with neighboring states.
Pennsylvania’s 3.07% income tax rate is far more attractive than the 6.37% rate many middle income families and small business owners pay in New Jersey, and certainly preferable for businesses that file at the state’s 8.97% top rate.
New Jersey lost more residents to Pennsylvania- over 20, 000- than any other state in 2010. That figure is roughly one-third of the total population loss New Jersey experienced that year. The economic and cultural impacts of these moves are real.
The engines of job creation and population growth in America, states like Texas, Florida, and the Carolinas, have tax rates that either are far lower than New Jersey’s or no income tax altogether.
It cannot be sheer coincidence that the states experiencing economic success are ones that have favorable tax climates as compared with the rest of the nation. Income tax levies are a substantial factor in a state’s overall business climate and economic growth.
Opponents of the Governor’s tax cut plan in the Legislature are trying to confuse the issue by changing the subject to property taxes. I agree that New Jersey’s highest in the nation property taxes are the shame of our state and must not only be contained, but lowered. Unfortunately, the Democrats’ plan to use state tax revenues to offset local levies is unlikely to reduce a single county, municipal, or school tax rate.
Their plan is a state incentive for property tax increases, not a solution for reducing them. Permanently lowering property taxes requires us to help local governments control labor costs, share services, and live within their means so that fewer tax dollars are needed to operate.
The effort to reduce property tax bills need not, and should not, come at the expense of job creation and economic growth in New Jersey.
Income taxes do matter to our economic health and jobs climate. Businesses, and the experiences of states that have successfully attracted job growth, show this to be the case. It is time that New Jersey start listening to them in order to strengthen our economic future.
State Sen. Tom Kean, Jr., R- Union, serves as the Senate’s Republican leader.
O’Scanlon: “I’m holding my breath waiting for S&P to revise their report.”
Wall Street rating agency, Standard and Poor’s, released an analysis of Governor Christie’s Fiscal Year 2013 budget yesterday that concurred with the reaction that many on both sides of the aisle have had since Christie addressed the legislature on Monday; Where are these revenue numbers coming from?
NEW YORK (Standard & Poor’s) Feb. 24, 2012–New Jersey Gov. Chris Christie
released his proposed $32.15 billion budget for fiscal 2013 on Feb. 21. The
budget remains structurally unbalanced, is built on what Standard & Poor’s
Ratings Services regards as optimistic economic projections to close the
budget gap, and increases New Jersey’s (AA-/Stable) reliance on nonrecurring
revenues.
Christie’s budget projects revenue growth of 7.3% to $31.86 billion. Based upon the state’s projections, revenue would have increased 9%, if not for Christie’s proposed income tax reduction. While S&P concurs that revenue could increase significantly in a strong economy given New Jersey’s high income and progressive income tax structure, the agency doesn’t see a strong economy on the horizon in New Jersey until 2015.
“Due to New Jersey’s high incomes and the state’s progressive income tax
structure, we believe revenues could rebound significantly in a strong
economy,” said Mr. Sugden-Castillo. “However, in our view, the economic
assumptions that underpin the state’s revenue forecast appear to be optimistic based on current and projected economic conditions at the state and national levels,” he added. Through the first half of fiscal 2012, New Jersey revenues grew 3.2% from fiscal 2011, but are still falling 3.2% below budgeted amounts. According to IHS Global Insight Inc., the state will register 1.3% growth in 2012- 16th among all states. Unemployment in the state was 9% as of December 2011. IHS Global Insight projects employment will not return to pre-recession levels until 2015 and projects unemployment to remain above 8% through 2014.
Assemblyman Declan O’Scalon, the Republican Budget Officer in the lower house, said that S&P’s report is so flawed that it resembles a political hit piece more than an objective credit analysis.
“S&P, and other critics, are relying on the year to date short fall in our current revenues compared to budget in order to give their criticism of our new budget credibility,” said O’Scanlon, “They are all ignoring the well known fact that the lion’s share of state revenue comes in during the first quarter of the calendar year.”
O’Scanlon said that New Jersey’s revenue receipts will be right on budget at the end of February and that S&P should have known that.
“I’m holding my breath waiting for S&P to revise their report,” said O’Scanlon, “For two years, the Christie administration’s revenue projections have been spot on. I’m confident they will be this year too.”
Regarding the reliance of non-recurring revenues O’Scanlon said, “13% of Jon Corzine’s last budget relied on so-called one shot gimmicks. The Christie administration reduced that to 4% in the current budget and it’s only 5% in the proposed budget. There are always going to be non-recurring items. We (the Republicans) have brought them down to prudent levels. S&P should be praising that part of our budget, not criticising it.”
S&P also criticized the Christie administration for underfunding the state pension system:
Slightly more than half of the increase ($587 million) in
total spending is tied to pension funding cost increases. Total funding for
defined benefit pensions grows to $1.1 billion in fiscal 2013 from $484
million in fiscal 2012. Defined Benefit Pension funding accounts for 3.33%of
spending in the proposed budget. Despite this significant increase, New Jersey
is only funding 28.6%, or 2/7ths, of its statutorily determined actuarial
recommended contribution, which is different from ARC as defined by GASB.
According to the state, the ARC as calculated by GASB is normally higher than
the statutorily determined actuarial recommended contribution. The
underfunding of the ARC results in continued pressure on its pension system.
“To treat what the Christie administration has done with the pension system as news and a negative ignores recent history and raises suspicions of political motivation on the part of S&P,” O’Scanlon charged, “The Governor’s proposed budget makes the largest pension contribution in New Jersey history and is right on track with the pension reforms and benefit reforms passed last year.”
O’Scanlon defended the 3.7% increase in spending under the proposed budget. “What should be cut? The increased spending on education and municipal aid holds down property taxes. The other increases are for pensions and higher education, which has been neglected for decades. Our educated and sophisticated workforce is our most important asset.”
John Sugden-Castillo, S&P’s primary credit analyst for the report, has not responded to an email asking for comment.
By Assemblyman Declan O’Scanlon, Republican Budget Officer
It’s a simple question loaded with political appeal: “With so many people hurting, and income disparities rising, shouldn’t we ask New Jersey’s millionaires to a ‘fair share’ in taxes?”
OK. What’s a “fair” share?If the current share of state income tax paid by the top 1% of New Jersey’s taxpayers — about 37 percent — isn’t high enough, what is?Would 80 percent be fair?90 percent?Taxpayers earning $1 million pay an effective tax rate this is about four times what taxpayers earning $100,000 pay.When and how will we know when we’ve achieved “fairness”?
Unfortunately, intense partisanship feeding on visceral emotions has made it virtually impossible to have a rational conversation about taxes in America.As a senior member of the State Assembly’s Budget Committee, I think those of us in positions of leadership have a responsibility to do more than stoke emotions, and instead adopt tax policies that generate the revenue needed to support the State’s budget priorities on a fair and sustainable basis.
Piling taxes on the “rich” may be great politics, but it’s lousy public policy.New Jersey already has a “progressive” income tax system which, thanks to high-income households receiving a greater proportion of their income from investments and capital gains, has made our revenue base highly volatile.Additionally increasing our relative reliance on high-income taxpayers will increase volatility, making it more difficult to engage in prudent long-term financial planning.
Most experts believe increased volatility is a problem because fiscal stability is a condition precedent to sound policymaking.Wild fluctuations in revenues fuel an inefficient boom-and-bust approach to budget-making that mismanages popular expectations. The impact of emergent budget cuts on New Jersey residents is regressive – those at middle and lower income levels experience the pain of budget cuts disproportionately since they more often benefit from state programs.
Some editorialists have suggested Governor Cuomo’s recent decision to embrace higher rates for high income New Yorkers should serve as an example for New Jersey.Perhaps they should read the fine print.New York’s “tax increase” is no such thing.New York’s current high rate is 8.97%, the same as New Jersey’s.Instead of letting the rate go down to 6.85%, as scheduled, Cuomo is saying he’ll let the rate fall to 8.82% for taxpayers at $2 million or more, but let the rate fall to 6.85% for taxpayers between $300,000 and $2 million.Everyone in New York will get a tax cut, but folks above $2 million will get less of a tax cut than they had expected.If that’s the standard of “fairness,” maybe the editorialists are right and we should follow New York’s example!Here’s the critical point: the top marginal rate in New York will soon fall below the top rate in New Jersey; that’s not good news for our competitive position.
New Jersey Treasury’s Chief Economist’s review of national IRS data confirmed a statistical connection between tax increases enacted under former Governor McGreevy and an increase of affluent taxpayers who moved out of, or never moved into, New Jersey.The Chief Economist also conducted a survey confirming a significant proportion of tax advisors had discussed moving out of New Jersey with their relatively affluent clients.Contrary to the often inaccurate summaries in the popular press, the study and the separate survey were modest in scope and merely confirmed what we already know: yes, Virginia, taxes matter.
Are they the only competitive consideration? Absolutely not. Infrastructure, regulations, climate, educational levels and other factors play a major role.But there’s no denying taxes figure into investment and location decisions.
Instead of asking “what’s fair?” we should be asking “what’s in our long-term self-interest?”I suggest it’s in New Jersey’s self-interest to pursue policies that support sustainable and growing revenue collections over time.Although New Jersey cannot expect to compete globally on the basis of low taxes alone, we should avoid negative “outlier” status and with it the kind of reputation that once prevented New Jersey from getting into the starting blocks when companies and leaders make site selections.
