New Jersey’s revenue collections may trail Governor Chris Christie’s estimates by a combined $537 million this fiscal year and next as taxes on income and casinos fall short, the Legislature’s chief budget analyst said.
Collections will be below Christie’s targets by $145 million in fiscal 2012 and $392 million in the year that begins July 1, according to a report from David Rosen, budget analyst for the nonpartisan Office of Legislative Services. Rosen, 64, told the Senate Budget Committee today that his own projections may be “overly optimistic.”
Rosen’s report, which estimates revenue growth of 6.5 percent for fiscal 2013, may make it harder for Christie to get his budget approved by the Democratic-led Legislature, said Committee Chairman Paul Sarlo. The governor, 49, a first-term Republican, has proposed a $32.1 billion spending plan that counts on a 7.3 percent gain in revenue, the most since before the recession began in December 2007.
“The administration’s targets are a lot more optimistic, a lot more rosy,” Sarlo, a Democrat from Wood-Ridge, said in a telephone interview. “Ultimately, it’s the governor who has to certify revenue, he has that authority.”
‘Dead on Arrival’
Christie told reporters in Atlantic City today that Rosen’s office is “partisan” and “merely a tool” for Democrats. He called the office’s work “background noise to the Jersey comeback.”
“These are the same guys who last year said I underestimated by $400 million,” Christie said. Rosen’s figures, he said, are “dead on arrival before he sits down.”
Christie has proposed a 10 percent income-tax reduction over three years for every New Jersey resident. He also is trimming business levies. The governor has said he is able to cut taxes now that the state’s “fiscal house is in order.”
The budget, while smaller than fiscal 2008’s, is the second-largest in New Jersey history, Treasurer Andrew Sidamon-Eristoff told lawmakers. The state is in a position to make “choices and investments” after two years of spending cuts, he said.
New Jersey’s economy “is not out of the woods yet,” Rosen told lawmakers. The European debt crisis, the possibility of slower-than-anticipated U.S. economic growth and higher energy prices could depress tax collections, he said.
“The revenue forecasts we’ve made are an optimistic set of assumptions and we realize they may be overly optimistic,” Rosen said. “We’re lower than the administration, but we’re still optimistic.”
Rosen said April income-tax collections will determine whose assumptions are correct. April is the largest month of the year for income taxes, which are the most volatile of all revenue sources, Rosen said.
“The infamous ’April Surprise’ has been either unexpectedly pleasant or painful,” he said. “The reality may be well outside the bounds of either of our estimates.”
The governor’s budget proposal is structurally unbalanced because it is built on “optimistic” growth projections, Standard & Poor’s said in a Feb. 24 report. The plan also depends on using $288 million of reserves and increases the state’s reliance on one-time revenues to $1.6 billion, S&P said.
Rosen estimated that Christie’s budget has $2.1 billion of one-time revenues. The governor’s plan projects total revenue of $31.9 billion, while Rosen estimates $31.5 billion.
The state’s general-obligation bonds are rated AA- by S&P, fourth highest. Ten-year debt of New Jersey issuers yields about 2.78 percent, or 0.4 percentage point more than top-rated securities, the smallest difference since Feb. 6, according to data compiled by Bloomberg.
For the first eight months of fiscal 2012, revenue was 1.7 percent below targets, or 4.3 percent more than the same period of 2011, Sidamon-Eristoff said on March 7.
Income taxes will trail the administration’s targets by $157 million in the 12 months ending June 30 and $308 million in the next year, the legislative services office said.
Christie’s administration is projecting income-tax collections of $11.8 billion, an increase of 6.3 percent over fiscal 2012. Reaching this target, after accounting for $250.3 million of tax reductions, requires growth of 8.4 percent, according to Rosen’s report.
His office projects 5 percent growth in collections of the gross income tax, or GIT, after accounting for tax changes. The lower forecast reflects “differing views of how strong the GIT revenue recovery will be,” according to the report.
Estimated income-tax payments in January were 8 percent below targets, Rosen said. Those payments may be an indicator of April collections, he said.
Along with income taxes, Rosen said he is concerned about Christie’s projections for tax revenue from casinos. Rosen’s report estimates casino taxes and fees of $267 million in fiscal 2013, or 7.9 percent growth. Christie projected $287 million, up 16 percent from an estimated $247 million in 2012.
Christie has said Atlantic City tourism will help revive New Jersey’s economy. He was there today to tour the newly completed $2.4 billion Revel Resort and Casino, which is scheduled to open May 25.
The governor said he is confident in Revel as a catalyst for Atlantic City and the region. Revel, which got $260 million of tax incentives from the Christie administration, will create more than 5,000 jobs, distribute more than $153 million in payroll and generate $155 million in state and local taxes annually, the governor’s office said in a statement.
Christie’s administration is sticking by its forecast for 7.3 percent revenue growth, Sidamon-Eristoff said today. Bonuses and “non-salary” income will rise during the economic expansion, he said.
“Although we are by no means out of the woods, the governor’s budget proposal for fiscal year 2013 reflects the fact that, together, we have begun to stabilize our finances,” the treasurer said.