B: NJ Rushing To The June 30 Finish Line: The Budget and Tax Cut Proposals

 Whatever does not pass the legislature in about two week will probably not see the light of day for three or many more months later. There are important issues under consideration now including minimum wage, Rutgers/UDNJ/RutRow, teacher tenure, drug courts, a bond issue for public and private colleges, and more. But let's take one proposal at a time, and start with the mad rush to complete the budget with or without a "tax reduction" plan.

The two alpha males, Governor Christie and Senate President Sweeney, have been holding private conversations. Christie carries the big stick but does not speak softly. He said yesterday he wouldn't sign a budget which does not include a tax cut and he uses the scare tactic of closing down the government after June 30. For him any type of "tax cut," even if it is really "property tax relief," is something he can take on his national tour, use to increase his Republican Party credibility, and help him win votes next year in a re-election bid. Likewise Senate President Sweeney can use passage of a popular property tax relief program to help him in his political ambitions. Let's remember that this program does not reduce property taxes, it just provides a credit to tax payers which increases the State budget. Some legislators, see this facile program as a win-win in NJ's tradition of giving voters what they like and not worrying about the future. Deja vu all over again!

However, the piper must be paid. In view of NJ's reduced incoming tax revenues and slow economic growth, we do not have the money to pay the piper and we have other more pressing needs. The governor projects a tax revenue shortfall of about $700 million and OLS predicts a shortfall of $1.4 billion, either of which is perilous in these uncertain times. The governor placed $183 million in the 2013 Budget for his 10% tax cut - an amount the legislature has proposed using for property tax relief. According to the State House Bureau the tax cut puts NJ on a course to lose at least $1 billion annually in the coming years.

The just issued National Governors' Association Report: The Fiscal Survey of States provides new data and insight regarding NJ's 2013 Budget proposals:

  • The Budget increase of 7.2% is the highest percentage expenditure change of any state. Other than California, all other states project less than 6%, and some project decreases. (page 19)
  • The budget has significant program cuts in Public Assistance and Medicaid. (page 23)
  • NJ budget uses net transfers to other funds (page 35) which reduces transparency.  
  • Substantial increases in projected sales, personal income and corporate taxes (page 51) which are hard to justify.
  • The Governor has not proposed significant changes at the state level which affect local governments' financial operations. (page 81)
  • The total budget balance as a percentage of expenditures is 0.9% ranking it 47th. (page 62)

    47th, according to the National Bureau of Labor Statistics, is where we ranked in 2011 in terms of economic growth. 47th is also how Chief Executive Magazine rated NJ as a place to do business. This is no time for the government to spend $183 million on any kind of tax reduction program. There may be a desire on the part of Christie to increase to $400,000 in income the level at which property tax relief becomes available or there may be a desire on the part of legislators to reduce the the cost of the program or introduce it more gradually. However, the reduced tax revenues, high unemployment, high indebtedness, our economy, and many other more important needs all make clear that this is not the time to gives ourselves a tax reduction present. In the German fairy tale the result of not paying the piper resulted in the death of children, which given our governor's attitude toward Medicaid and public assistance, could be our fate as well.        

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