New Jersey state budget

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In the past 10 years New Jersey's budget has doubled from $13 billion to $30 billion.^[1]

New Jersey's FY2011 budget became law on June 29, 2010, when Governor Chris Christie signed it into law.^[2] Final votes on the $29.4 billion budget bill were held in the early hours of June 29, 2010, two days before the constitutional deadline to approve the budget.^[3][2] Sen. Tom Kean Jr., the minority leader, pledged to have all 17 Senate Republicans vote yes on all budget bills.^[4] 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.^[5]

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.^[6]

The Securities and Exchange Commission filed fraud charges against New Jersey for misrepresenting its financial obligations, particularly its pension obligations, and misleading investors in its bonds.^[7]

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

[edit] FY 2012 Budget

In an internal report issued July 2010 by the nonpartisan Office of Legislative Services, requested by Assembly Democrats, estimated a state budget shortfall of $10.5 billion for FY2012. The Office of Legislative Services calculated a $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.^[8]

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.^[9] State Treasurer Andrew Sidamon-Eristoff called the figure "wildly inflated." The gap "will not be anything near" $10 billion.^[10]

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.^[10] Gov. Christie, however, said a few days later that the state may not be able to make a required pension payment.^[11] 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.”^[11]

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.^[11]

[edit] FY 2011 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.^[2][12] Final votes were held for June 29, 2010.^[2]

The budget eliminates $848 million from property tax rebates. It also reduces the amount of state aid sent to municipalities and local school districts.^[2] 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.^[2]

The state began budget negotiations facing a $10.7 billion deficit^[13], which is largest per tax payer of any state.^[14] 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.^[3][15]

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.^[2]

Gov. Chris Christie introduced his budget proposal on March 16, 2010.^[13][16] 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.^[17]

The Governor's "Budget in Brief" included the following chart^[18]:

How FY 2011 Budget Balanced

(In Thousands)

Category	Amount
FY 2010 Adjusted Appropriation	$29,862,146
FY 2011 Net Growth	8,540,209
FY 2011 Total Projected Model	38,402,355
FY 2011 Base Revenue	27,665,900
FY 2011 Projected Structural Gap	10,736,455
ACTIONS TO CLOSE STRUCTURAL GAP	$10,736,455
Reductions to Base Budget	$1,929,241
Homeowner and Tenant Rebates	848,200
Municipal and County Aid	339,021
Higher Education	175,375
Operating Budget and Interdepartmental	163,989
Medicaid/PAAD	92,929
Senior Tax Freeze	53,700
Savings from Privatization	50,000
Human Services Contracts	35,600
General Assistance Benefits for the Able-Bodied	23,445
Child Care Programs	19,800
Employee Actions	8,799
Other	118,383
Elimination or Reduction of Projected Growth	$7,082,720
Pensions	3,060,543
Limit School Aid Increases	1,677,500
Inflationary Increase for Rebates	1,163,100
NJ Transit	272,000
Medicaid	236,059
Rate Inflation for Nursing Homes	56,612
Inflationary Increase for Higher Education	45,994
Other	570,912
Elimination of Programs	$ 216,620
Subtotal	$9,228,581
Enhanced Federal Medicaid Funding	$490,569
Resource Solutions	$601,549
Supported by Non-State Resources	$415,756

[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.^[13] 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.^[13]

[edit] Budget Cuts

In his speech announcing the budget, Gov. Christie said, "Time has run out, and the bill has come due.”^[12] Gov. Christie's budget relies primarily on spending cuts to close the budget shortfall.^[12] 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.^[19]

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.^[2][13] The proposed budget skips a $3 billion payment to the pension system^[20]; Gov. Corzine skipped a $2.5 billion pension payment for FY 2010 and also permitted municipalities to defer half of their scheduled contribution.^[13] The state pension fund is underfunded by $46 billion and at risk of eventually becoming insolvent unless fixes are made.^[13] In March, the governor signed a package of bills barring part-time workers from the pension system.^[11]

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.^[21]

About $820 million in school aid will be cut^[22] on top of the $475 million that was just cut to rebalance the 2010 budget.^[13][12] The budget reduction of $820 million accounts for 7% of total school funding.^[12] District would lose formula aid worth 5% of their current budgets.^[23]

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.^[23]

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.^[24]

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.^[12]

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^[13], this year will be approximately 75% less.^[25] 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.^[13] The budget does call for a 2.5 cap on local property-tax increases.^[26]

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.^[12] 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.^[11]

Tax Increases Tax increases on insurers and hospitals are part of the FY2011 proposed budget.^[19]

[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.^[19] In addition, the Governor proposed a hospital tax and new professional licensing fees^[13]

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.^[27]

[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.^[28]

[edit] FY 2010 Budget

The state faced a $4.3 billion budget deficit, revised down June 2009 from the May 2009 estimate of $4.4 billion)^[29] for FY 2010. Then Gov. Jon S. Corzine signed the $29 billion FY 2010 budget on June 29, 2009 that was passed by the New Jersey Legislature.^[30] New Jersey's total adjusted FY 2009 budget was $33.2 billion with $19.4 billion in General Fund spending.^[31] The FY 2010 budget that began July 1, 2009 has:^[32][33]

• $4 billion in baseline spending cuts, with more than 850 line items being cut that include:
  • $527 million from State Operations
  • $1.5 billion from Grant-In-Aid
  • $1.2 billion from State Aid using $1 billion of federal stabilization funding
• Increase in education of $300 million

FY 2010 1st Quarter revenues were down 3% from projections collecting $5.95 billion instead of the estimated $6.14 billion the budget was based, creating a $190 million shortfall. Gov. Corzine has ordered department heads to look for $200 million in additional cuts by Dec. 1, 2009.^[34]

As the year went on, the state made additional cuts. As of March 2010, $475 million had already been taken out of budgeted state aid to schools for the school year already in session. Programs that were set in place in September 2009 were based on this expected state support.^[35]

[edit] Budget figures

General Fund 2009-10^[36]

Category	FY2009 Amount in millions Actual	FY 2010 Amount in millions Estimated
Beginning Balance	1,304	614
Revenues	29,060	27,338
Adjustments	562	0
Total Resources	30,926	27,952
Expenditures	30,312	27,442
Adjustments	0	10
Ending Balance	614	500
Budget Stabilization Fund	0	0

Fiscal 2010 Tax Collections Compared With Projections Used in Adopting Fiscal 2010 Budgets (Millions)^[36]

Category	Amount
Sales Tax Original Estimate	8,579
Sales Tax Current Estimate	8,067
Personal Income Tax Original Estimate	10,393
Personal Income Tax Current Estimate	10,393
Corporate Income Tax Estimate	2,440
Corporate Income Tax Estimate	52,270

The following table provides a history of New Jersey's expenditures and gross domestic product (GDP).

Fiscal Year	Expenditures (billions)	GDP (billions)
2000	$54.5 [37]	$344.8 [37]
2001	$59.4 [37]	$363.0 [37]
2002	$64.2 [37]	$372.8 [37]
2003	$68.4 [37]	$389.1 [37]
2004	$72.6 [37]	$410.1 [37]
2005	$79.8 [37]	$425.5 [37]
2006	$82.9 [37]	$448.4 [37]
2007	$85.6 [37]	$465.5 [37]
2008	$88.5 [37]	$480.9 [37]
2009	$91.5* [37]	$480.1* [37]

• NOTE: The figures for FY 2009 won't be finalized until the end of the fiscal year.
• See New Jersey state budget (2008-2009) for more information.

New Jersey's major state revenue sources are:^[38]

• $11.3 billion Income tax, 37%
• $8 billion Sales Tax, 27%
• $3.8 billion "Other" taxes, 12%
• $2 billion Corporation and Bank Tax, 7%
• $929 million State Lottery, 3%

[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."^[39]

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.^[39]

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.^[40]

[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.^[41]

• 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.^[42] New Jersey's CAFRs prepared are published online by the New Jersey Department of the Treasury, Office of Management and Budget.^[43]

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.^[44]

Credit Rating	Fitch	Moody's	S&P
New Jersey[45]	AA-	Aa3	AA

[edit] Economic Stimulus Package

New Jersey will receive approximately $680 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.^[46]

New Jersey received approximately $1.2 billion from the $787 billion dollar economic stimulus, the American Recovery and Reinvestment Act 2009.^[47] All told, the federal stimulus plan would create or save 100,000 jobs in New Jersey, based on White House estimates.^[48]
For more information on how the federal stimulus funds are being used in the state of New Jersey, visit the state recovery website.

According to preliminary reports, New Jersey is expected to receive:

• $609 Million for Title 1 and IDEA (Individuals with Disabilities Education Act)^[49]
• $6.8 Million towards health care services^[50]
• $894 Million towards transportation projects^[51]
• $73.6 Million for energy efficiency and renewable energy projects^[52]
• $2.6 Million for senior nutrition programs^[53]

[edit] Budget transparency

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).^[54]

[edit] News

• The "Transparency in Government Act" was reintroduced in the 2010-11 legislative session.^[55]. It was designated as S-708, the full text of which can be read here.^[56][55]

• 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.^[57]

[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	Exemption Level
New Jersey Transparency

See also: Evaluation of New Jersey state website

[edit] Economic Stimulus Transparency

• New Jersey expects to receive $399 million for Medicaid expenses for the first half of 2011 from the federal stimulus approved by Congress in August 2010 New Jersey, which is $180 million less than Gov. Chris Christie planned for in this year’s budget. However, the governor did not immediately move to adjust the budget.^[6] The state also expected to receive $268 million in education funding.^[6]

• The American Recovery and Reinvestment Plan of 2009 designated $787 billion to be spent throughout the U.S. Of that $787 billion stimulus package, it is estimated that 69%, or over $541 billion, will be administered by state governments.^[58]

• New Jersey will receive an estimated $4,248,900,457 ^[59]

• The economic recovery website to show how legislators and government officials in New Jersey are spending Federal funds is available here.

[edit] Error in ARRP

On November 16 and 17, 2009, many errors were found in the $747 billion plan that showed the plan set aside money for districts that do not exist. According to Recovery.gov, the plan shows its funds will go to 884 Congressional Districts, though there are only 435.^[60][61]

New Jersey’s number of Congressional Districts grew from 13 to 31, according ARRP's website. Millions of stimulus dollars were distributed to 18 Garden State districts that do not exist, totaling $25,630,567 to "create/save" 574.6 jobs.^[62]

[edit] Public employee salaries

The Asbury Park Press provides employee data for New Jersey, and the Rutgers-Newark Observer has salary data for employees of Rutgers-Newark. In addition, information regarding salaries paid to state officials and employees can be found at New Jersey state government salary.

[edit] See Also

New Jersey taxpayer-funded lobbying

[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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