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June 08, 2023

New Jersey state revenue continues to fall short of projections, officials say

Income, sales and business taxes — major sources of state revenue — fell about $500 million shorter than predicted

New Jersey will have even less money for the coming budget than previously anticipated after the state missed revenue targets in May, senior members of Gov. Phil Murphy’s administration told South Jersey business leaders Tuesday.

The state’s major revenue sources — a group that includes income, sales, and business taxes — collected more than $500 million less than anticipated in May, led by a income tax shortfall of more than $400 million, said Darryl Isherwood, a Treasury spokesperson.

The drop adds to a $2 billion downward shift in revenue for the current and coming fiscal years officials predicted in revenue forecasts last month.

“May looks like it’s going to be another difficult number,” Murphy administration chief counsel Parimal Garg said during a panel hosted by the Chamber of Commerce of Southern New Jersey. “You’re going to have the revenue figures come down even further, and we haven’t even hit the recession that a lot of people are forecasting could be happening over the next six to 12 months.”

Speaking to reporters following the event at the Ramblewood Country Club in Mount Laurel, Murphy chief of staff George Helmy said the state “missed the revenue mark” in May, though he declined to say how far off the state’s projections were.

Final revenue figures for the month of May are expected to be released next week.

Declining revenue is likely to complicate ongoing budget negotiations between Murphy and Democratic legislative leaders who back a costly property tax relief proposal aimed at New Jersey seniors.

That program, called StayNJ, has received a frosty reception from the administration, which says it is worried about its cost and lack of means testing and believes the program would be impossible to implement.

Tumbling revenue won’t help the program’s supporters address those concerns.

“I think anytime the revenues continue to miss the projections and continue to miss the projections significantly, it will factor into how much you have leverage to spend or not spend,” Helmy said.

StayNJ would offer New Jersey residents ages 65 or older tax credits worth 50% of their property tax bill, to a cap of $10,000. 

Assembly Speaker Craig Coughlin (D-Middlesex) and Senate President Nicholas Scutari (D-Union) are sponsoring the StayNJ bill. Spokespeople for both men did not immediately return requests for comment.

Their legislation and associated programs meant to reduce seniors’ health care costs are expected to cost roughly $840 million in the fiscal year that begins July 1, though some of that money would be appropriated from the current fiscal year’s budget.

Legislators expect the programs to cost close to $1.5 billion annually once StayNJ completes its phase-in in July 2028. Murphy administration officials have said it would cost slightly more, $1.7 billion.

“If you make a $1.7 billion annual appropriation, which is what we believe this plan is fully scaled up, it’s hard to see how you afford that,” Helmy said during Tuesday’s panel.

Legislators have yet to settle on a source of funding for StayNJ. Scutari last month suggested the state could extend a 2.5% surtax on business profits above $1 million dollars past its planned sunset at the end of 2023.

It’s not clear whether Coughlin supports such an extension, but Murphy opposes it, as do some members of Scutari’s caucus, including Sen. Paul Sarlo (D-Bergen), who in late May said he backs allowing the surtax to expire. Sarlo chairs the Senate’s budget committee.

Business groups have long sought cuts to the state’s corporate business tax — it’s among the nation’s highest without the surtax and tops the list with it — charging it makes the state uncompetitive.

Progressive groups, environmental organizations, labor unions and local officials have called on lawmakers to extend the surcharge, arguing its sunset would be a handout to the state’s most profitable businesses.

The first legislative hearing on the StayNJ proposal is scheduled for Thursday.

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