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New Jersey state budget

In the past 10 years, from FY2001 to FY2011, New Jersey's state budget has doubled from $13 billion to $30 billion.^[1] The FY2013 budget proposed by the governor totals $32.1 billion.^[2]

The $29.7 billion budget Gov. Chris Christie signed into law on June 30, 2011, eventually rose to $31 billion as the administration supplemented spending, in part because the state legislature underfunded some areas, said Treasurer Andrew Sidamon-Eristoff in Feb. 2012.^[3]

New Jersey has a total state debt of approximately $281,544,674,000 when calculated by adding the total of outstanding official debt, pension and other post-employment benefits (OPEB) liabilities, Unemployment Trust Fund loans, and the budget gap. ^[4]

See also: The New Jersey State Budget on State Budget Solutions

[edit] FY 2013 Budget

Gov. Chris Christie proposed his $32.1 billion state budget on Feb. 21, 2012. The governor's proposed budget can be found here and the full text of his budget address can be found here. The proposed budget increases spending 8 percent more than FY2012.^[7]

Gov. Christie based his budget on his prediction that revenue will increase 7.3 percent in FY2013.^[8] That prediction was seen as optimistic after the first 10 months of FY2012 saw revenues drop.^[9] Standard & Poors, however, said it was an “optimistic” economic-growth projection and called the budget structurally unbalanced.^[10] Highlights of the budget include:

• the state making a $1.1 billion pension payment;^[8]
• increase school aid by $213 million;^[8]
• reducing aid to ailing cities;^[8]

The proposed budget also includes $183 million to fund the first half-year of the governor's 10 percent income tax cut and money to fund a 5 percent increase in the Earned Income Tax Credit for poor working families. The increase would boost the average benefit to $495 per family.^[11] During his State of the State address, Gov. Christie announced plans to reduce the state income tax by 10%, saying New Jersey could afford it because the state's finances improved over the last year. His administration has said the cuts would be phased in over the next three years, but has not explained how much taxes would go down year by year, or how it plans to deal with the revenue gap. New Jersey depends on the income tax for roughly one-third of its revenue.^[12]

Currently, top income tax rates in the region are:

New Jersey 8.9%

New York 8.82%

Connecticut 6.7%

Since 2003 the top marginal rate in New Jersey has risen to 8.9% from 6.25%. Although Christie's proposal will not bring the top rate lower than Connecticut, Connecticut has higher property taxes.^[13]

The governor would need to introduce his income-tax cut as a bill separate from the budget. Democrats, who hold a majority in both legislative houses, have urged him to abandon the plan and instead focus on lowering local property levies, the nation’s highest at an average of $7,759 in 2011^[14]

Some of the budget challenges the state faces in FY2013 include:

• $1 billion pension payment;
• $300 million debt service on the 1997 bond sale floated by former governor Whitman^[15]

[edit] FY 2012 Budget

• See past state budgets

Revenue collections lag

Ten months into FY2012, the state faced a revenue shortage of $351 million.^[16]

Through the first quarter of FY2012, the state revenue collections were 3.6% below budget projections, with the state collected $4.15 billion for the first three months of the fiscal year, less than the $4.30 billion budgeted.^[17]

Supplement Spending

The $29.7 billion budget Christie signed into law eventually rose to $31 billion as the administration supplemented spending, in part because the Legislature underfunded some areas, said Treasurer Andrew Sidamon-Eristoff in Feb. 2012.^[18]

The legislature and Chris Christie were at odds over the FY2012 state budget, with the Democrats sending the governor a proposed budget on June 29, 2011, the next to last day of the legislative session.^[19] The governor vetoed $30.6 billion in spending and then signed by the budget on June 30, 2011.^[20] The governor's spokesperson had previously said, "The Democratic budget passed today by the Senate and the Assembly is unconstitutional in its present form based on hundreds of millions of dollars in spending that is unsupported by constitutionally certified revenue."^[21]

Governor Christie said that New Jersey would have available revenue of $30.3 billion for FY2012, and the Democrats' proposed budget relied on $300 million more in revenue.^[22]

The $10.5 billion deficit that New Jersey faces in FY2012 is equivalent to approximately 10 years of tolls collected on the Turnpike and Garden State Parkway combined.^[23] The Office of Legislative Services calculated the $10.5 billion shortfall by counting all mandatory increases in state funding and assuming all programs now in the budget would be included next year. The report noted that many of the sources of the FY2011 deficit would be an issue in the coming year as well, including that schools will be due $2.3 billion more, and the state will owe $2.1 billion in tax rebates.^[24]

Officials disputed that figure. Gov. Christie disputed the figuring, arguing that the projection was invalid because the OLS counted all mandatory increases in state funding and mistakenly assumed all programs now in the budget would be included next year. "The ($10.5 billion) number is completely fake, and doesn't understand the new reality, which is I'm not going to approve spending that goes over that," Christie said during a news conference in Atlantic City.^[25] State Treasurer Andrew Sidamon-Eristoff called the figure "wildly inflated." The gap "will not be anything near" $10 billion.^[26]

Under the budget, the state will save approximately $15 million by no longer holding a special primary for the Presidential election in early February and instead having just one primary for all elections in early June. ^[27]

The FY2012 state budget can be found here.

[edit] Credit Downgrade

Fitch Ratings lowered New Jersey’s credit rating general obligation bonds from AA to AA– on Aug. 17, 2011. Fitch explained that it did so because of the state's pension problem, the weak economy and a state Supreme Court order in May that forced New Jersey to increase spending on low-income school districts. Fitch's rating of New Jersey now aligns with Standard & Poor’s. Moody’s, which uses a different system, rates the state equivalently, at Aa3. ^[28]

[edit] Legislative Proposed Budget

On June 23, 2011, Democratic leaders in the legislature unveiled their version of the 2011-12 state budget, a plan that totals $30.6^[22] billion, $400 million more than the fiscal package Gov. Christie has proposed.^[29]

The proposed budget would reinstate more than $1 billion to underfunded school districts and also places millions of dollars back into property tax relief. It would also institute a "millionaires tax," raising the tax rate for people with incomes above $1 million from 8.97 percent to 10.75 percent, higher than any of the neighboring states.^[29] The tax would generate $550 million more for public schools. ^[22] The Democrats’ proposed budget also would provide $50 million for police in high-crime cities, allot $1 million for women’s health care, which both took cuts in the governor's proposed budget, and also expand the earned-income tax credit for the working poor.^[22]

Gov. Christie said that he would not sign any tax increases and he does have line-item veto power.^[22]

[edit] Governor's Proposed Budget

Gov. Christie proposed his $29.4 billion FY2012 budget on Feb. 22, 2011.^[30]

His proposed budget includes having public employees pay a higher percentage of the cost of their co-payments and premiums in an effort to save the state an estimated $323 million. By 2014, the governor would require workers to pay for 30% of their medical benefits, up from 8% from when he proposed it.^[31]

Christie said that the state's pension system, which has a $54 billion deficit,should be overhauled.^[31]

[edit] Unions

The state will renegotiate 14 separate union contracts in FY2012.^[32]

Gov. Christie has said if the Democrats in the state legislature fail to cut public-employee benefits, he will cut popular property-tax refunds.^[33]

[edit] Pensions

The state treasurer said that the state planned to contribute $512 million to its pension funds for teachers and state employees in FY2012, which would be the first such payment in four years.^[26] Gov. Christie, however, said a few days later that the state may not be able to make a required pension payment.^[34] The governor acknowledged that the payment “is required under current law,” but said, “Laws change all the time. That’s our current intention, but that could change.”^[34]

The fund benefits nearly 800,000 current and retired state employees and teacher and the gap between its assets and anticipated payouts is $46 billion as of June 30, 2009.^[34]

Budget reforms proposed by the governor include repealing an increase in benefits approved years ago; eliminating automatic cost-of-living adjustments; raising the retirement age to 65 from 60 in many cases; reducing pension payouts for many future retirees; and requiring some employees to contribute more to their pensions. Christie said."We must reverse the damage caused by fairy-tale promises that have fattened benefits and pensions to unsustainable levels."^[35]

[edit] Medicaid

New Jersey will lose $900 million in federal funding for Medicaid in FY2012, and Gov. Christie has said he may cut Medicaid but did not give an amount.^[36]

[edit] Budget transparency

• See sample transparency legislation at the Sunshine Standard

New Jersey launched the New Jersey Transparency Center on July 1, 2010.^[37] The website contains data on tax collections, expenditures by various state agencies and payroll data for agencies and individuals.^[37] In November 2010 the state added financial information for 19 independent agencies such as the New Jersey Turnpike Authority and New Jersey Sports and Exposition Authority.^[38] A bipartisan bill to make the website permanent and also extend similar online oversight of government spending to the local level is stalled in the legislature.^[39]

New Jersey currently has no statewide, official spending database online, despite recent attempts to pass legislation that would create a searchable spending database. The General Assembly, however, passed billA-4103 introduced by Assemblymen Mike Panter and Gary Schaer. The bill would would require all governmental affairs agents to list their involvement with the annual appropriations act or supplemental appropriations legislation on the quarterly reports they file with the Election Law Enforcement Commission (ELEC).^[40]

[edit] Government tools

The following table is helpful in evaluating the level of transparency provided by a state spending and transparency database:

Criteria for evaluating spending databases

State Database	Searchability	Grants	Contracts	Line Item Expenditures	Dept/Agency Budgets	Public Employee Salary
New Jersey Transparency Center	Y	N	N	N	Y	Y

See also: Evaluation of New Jersey state website

[edit] FY 2011 Budget

Find the state’s FY2011 Comprehensive Annual Financial Report (CAFR) compiled by the state government here.

New Jersey's $29.4 billion FY2011 budget became law on June 29, 2010, when Governor Chris Christie signed it into law, two days before the constitutional deadline to approve the budget..^[41][42][41] Sen. Tom Kean Jr., the minority leader, pledged to have all 17 Senate Republicans vote yes on all budget bills.^[43] On July 14, 2010, Governor Chris Christie, whose state has the highest property taxes in the U.S., signed legislation capping annual increases in the levies at 2 percent, a reduction of the current 4 percent threshold on real estate taxes.^[44]

[edit] Passage of the Budget

The $29.4 billion FY2011 state budget garnered enough votes from Democrats in the Democrat-controlled Legislature and was signed by the Republican governor on June 29, 2010, two days prior to the start of FY 2011, which begins on July 1, 2010.^[41][45] Final votes were held for June 29, 2010.^[41]

The budget eliminates $848 million from property tax rebates. It also reduces the amount of state aid sent to municipalities and local school districts.^[41] The budget failed to include a $3.1 billion pension fund payment, which will ensure that the required payment in FY2012 will be even larger.^[41]

The state began budget negotiations facing a $10.7 billion deficit^[46], which is largest per tax payer of any state.^[47] A compromise between Governor Christie and the Democratic controlled legislature on [SC|June 21, 2010] restored $74 million in programs and services, with the Governor says he's thrilled the money was found without having to expand the size of the $29 billion budget.^[42][48]

The governor vetoed a Democrat-backed proposal to reinstate an income tax surcharge on residents making more than $1 million that would have been used to fund property tax relief for New Jersey seniors.^[41]

Gov. Chris Christie introduced his budget proposal on March 16, 2010.^[46][49] The full text of his speech introducing the budget can be found here.

[edit] Overview

In mid-August 2010, the state announced that it will borrow $2.25 billion in short-term notes to help pay the bills.^[50]

The Governor's "Budget in Brief" included the following chart^[51]:

How FY 2011 Budget Balanced

(In Thousands)

[edit] Federal Stimulus Money

After taking federal stimulus funds into account, Gov. Christie's budget is 9% less than the FY 2010 budget passed by the Legislature under Democratic Gov. Jon Corzine.^[46] Gov. Christie's FY 2011 budget represents a cut of $3 billion; New Jersey is getting $1.3 billion less in stimulus money than last year.^[46]

New Jersey will receive approximately $667 million from the federal government under H.R. 1586, a $26 billion plan to give states money for Medicaid and education that the President signed into law on August 10, 2010. The money would mean $399 million for Medicaid expenses for the first half of 2011 and $268 million in education funding.^[52]

[edit] Budget Cuts

In his speech announcing the budget, Gov. Christie said, "Time has run out, and the bill has come due.”^[45] Gov. Christie's budget relies primarily on spending cuts to close the budget shortfall.^[45] The governor did not renew an income tax increase on filers earning $400,000, and his budget also permits the expiration of a 4 percent tax surcharge on businesses.^[53] In September 2010, seven state Assembly panels held hearings to discuss how the state budget and the cuts needed to balance it affected citizens and businesses.^[54] Democrats saw the hearings as necessary and Republicans characterized them as "political theater."^[54]

Pension Contributions

Following the lead of his predecessor, Gov. Christie's budget skips the state's annual contribution the pension system for public workers for a second year.^[41][46] The proposed budget skips a $3 billion payment to the pension system^[55]; Gov. Corzine skipped a $2.5 billion pension payment for FY 2010 and also permitted municipalities to defer half of their scheduled contribution.^[46] The state pension fund is underfunded by $46 billion and at risk of eventually becoming insolvent unless fixes are made.^[46] In March, the governor signed a package of bills barring part-time workers from the pension system.^[34]

The governor has said that workers should expect cuts as he attempts to reform the public employee pension, which may include a rollback of a 9% pension increase granted in 2001.^[56]

School Funding

New Jersey barely missed out on $400 million in federal Race to the Top grants due to an error on one page of its 1,000 page application - the state provided budget information for the wrong year.^[57]

About $820 million in school aid will be cut^[58] on top of the $475 million that was just cut to rebalance the 2010 budget.^[46][45] The budget reduction of $820 million accounts for 7% of total school funding.^[45] District would lose formula aid worth 5% of their current budgets.^[59]

Christie cited the loss of $1 billion in federal stimulus money used to plug fiscal holes this year as one of the reasons for the cuts. His budget would allocate $7.98 billion in aid to districts, as well as allocate $1.8 billion for teacher pension costs and post-retirement medical benefits, plus $547 million for school construction, for a total of $10.3 billion in school funding.^[59]

Prior to the release of the Governor's budget, the State's acting commissioner of education noted that 40% of state and local spending combined is for education and that there was no way you can close a massive state budget deficit without touching spending for education.^[60]

State Worker Layoffs

Gov. Christie's budget calls for 1,300 state workers to be laid off, from a work force of about 65,000.^[45]

Property Tax Rebates

Citizens' property tax rebate checks that combat New Jersey's highest property taxes in the nation, which last year averaged $7,300 a household^[46], this year will be approximately 75% less.^[61] When rebates return in the spring of 2011, senior citizens, the disabled and low-income wage earners could get a tax credit rather than a rebate check but will get less than they received last year.^[46] The budget does call for a 2.5 cap on local property-tax increases.^[62]

Other Spending Reductions

Gov. Christie's budget eliminates the film-production tax credit and also cuts in one half a tax credit for high-tech businesses.^[45] The governor also signed bills capping payouts for unused sick-time and requiring employees to pay 1.5 percent of their salaries for health insurance.^[34]

Tax Increases Tax increases on insurers and hospitals are part of the FY2011 proposed budget.^[53]

[edit] New Sources of Funding

The budget counts on about $600 million in new revenue: Christie expects $30 million more from the lottery; $20 million from a new assessment on some insurance companies and an additional $18 million from taxing diesel motor fuel distributors.^[53] In addition, the Governor proposed a hospital tax and new professional licensing fees^[46]

The budget also counts on $80 million in additional revenue by speeding up the time frames before which unclaimed personal property default to the state. Christie's budget also includes $65 million in increased sales-tax revenue by repealing Bergen County "blue laws that prevent the malls from opening on Sundays.^[63]

[edit] Fraud Charges

New Jersey was accused by the Securities and Exchange Commission of concealing from bond investors financial information regarding the state’s two largest public pension funds — the Teachers' Pension and Annuity Fund and the Public Employees' Retirement System. New Jersey neither denied the charges nor admitted wrongdoing, but agreed to comply with an SEC cease-and-desist order issued on August 17, 2010. The state did not pay a fine or penalty.^[64]

[edit] Budget Basics

New Jersey is required to pass a "balanced budget." Article VIII, Section II, paragraph 2 of the 1947 Constitution states "no general appropriation law or other law appropriating money for any State purpose shall be enacted if the appropriation contained therein, together with all prior appropriations made for the same fiscal period, shall exceed the total amount of revenue on hand and anticipated which will be available to meet such appropriations during such fiscal period, as certified by the Governor."^[65]

If the governor does not believe that the distribution of appropriations is in the State's best interest, the Governor may block the appropriation of funds to state agencies; moreover, New Jersey law also permits deficits to be carried over from one year to the next.^[65]

New Jersey's fiscal year begins July 1 and ends June 30 of the following year. The governor reviews individual agency requests along with past and present expenditure and revenue data from November through mid-January. In February the makes his/her final decision and presents a budget recommendation to Legislature on or before the fourth Tuesday in February. The Legislature reviews the recommended budget through a series of hearings and makes any necessary changes to the document. Once both the Assembly and the Senate have approved the bill, it is signed by the governor before July 1, as stated in the state Constitution. The governor does have the power to use line-item veto before signing the bill into law.^[66]

[edit] Accounting Principles

Main article: New Jersey government accounting principles

The Office of the New Jersey State Comptroller is an independent office that audits government finances, reviews the performance of government programs and examines government contracts. The Office was created by legislation March 15, 2007. It is responsible for conducting audits of the executive branch of state government, public institutions of higher education, independent state authorities and local governments and boards of education. Appointed by the Governor, with the advice and consent of the Senate, the State Comptroller serves a six year term and can be reappointed for a second term. All employees of the Office of State Comptroller are barred from engaging in any political activity. Matthew Boxer was sworn in as New Jersey’s first independent state comptroller on Jan. 17, 2008. The audit reports are published online.^[67]

• Audits government finances
• Examines efficiency of government programs
• Scrutinizes government contracts
• Provides audit training to government entities

The Institute for Truth in Accounting (IFTA) rates New Jersey “Tardy” in filing the state’s Comprehensive Annual Financial Report (CAFR) – The annual report of state and local governmental entities. IFTA rated 22 states timely, 22 states tardy, and 6 states as worst. IFTA does not consider New Jersey's CAFRs, and those of the other states, to be accurate representations of the state’s financial condition because the Generally Accepted Accounting Principles (GAAP) basis does not include significant liabilities for the pension plans and for other post employment benefits, such as health care.^[68] New Jersey's CAFRs prepared are published online by the New Jersey Department of the Treasury, Office of Management and Budget.^[69]

The New Jersey State Treasurer is R. David Rousseau, who was confirmed by the State Senate and sworn in as State Treasurer on April 7, 2008. Rousseau was sworn in as Acting State Treasurer on January 16, 2008, soon after Gov. Jon S. Corzine announced his intention to nominate him to be State Treasurer.^[70]

[edit] Stimulus

New Jersey has received $1.4 billion in federal funding from the American Recovery and Reinvestment Act of 2009.^[72]

[edit] Public Employees

Main article: New Jersey public employee salaries

Main article: New Jersey public pensions

According to 2008 Census data, the state of New Jersey and local governments in the state employed a total of 585,379 people.^[73] Of those employees, 465,049 were full-time employees receiving a net pay of $2,459,242,541 per month and 120,330 were part-time employees paid $127,908,865 per month.^[73] More than 55% of those employees, or 322,868 employees, were in education or higher education.^[73]

[edit] External links

[edit] Additional reading

• FY 2011 Budget in Brief Issued March 16, 2010
• "If you tax them they will leave" March 16, 2010 Dailyrecord.com
• "New Jersey Governor Proposes Deep Spending Cuts," March 16, 2010 The New York Times
• "NJ gov seeks to slash spending, amend constitution," March 17, 2010 The Washington Post
• "Budget in Detox for Addicted NJ" March 17, 2010 Courrierpostonline.com
• "Dems: NJ budget a heavy lift for middle class" March 15, 2010 Business Week
• "Bret Schundler: School Aid Cuts Unavoidable" NJ.com March 15, 2010
• Christie budget suspends N.J. tax rebates" Philly.com March 16, 2010

[edit] References

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