On May 22, the Department of the Treasury delivered a budget update to the Legislature, providing a
detailed revenue report that illustrates the devastating impact COVID-19 has had on New Jersey’s finances. The review explained that the state is potentially facing a combined revenue shortfall of nearly $10 billion over the remaining months of Fiscal Year 2020 and through the end of Fiscal Year 2021 – a decline that would be worse than the Great Recession. It also laid out plans to close the looming budget gap for the remainder of FY2020 through a series of deep cuts and spending deferrals.
The report provided the most detailed account to date of the significant shortfalls expected among the major tax revenues:
Gross Income Tax (GIT)
- FY 2020 revenues are projected to be $910.9 million, or 5.4%, lower than Governor’s Budget Message (GBM) forecast
- FY 2021 collections are projected to be $3.955 billion, or 22.2% lower than GBM
Sales and Use Tax
- FY 2020 revenues are projected to be $1.131 billion, or 10.9%, lower than GBM forecast
- FY 2021 revenues are projected to be $1.528 billion, or 14.2%, lower than GBM
Corporation Business Tax (CBT)
- FY 2020 revenues are projected to be $451.9 million, or 11.6%, lower than GBM forecast
- FY 2021 revenues are projected to be $1.228 billion, or 32.0% lower than GBM
In addition to these projections, Governor Murphy announced the following steps had been taken to ensure the state remained in a solvent financial position:
- Review of state spending across all branches of government and placement of approximately $1 billion of available appropriations into reserve
- Transfer of the entire $421 million Surplus Revenue Fund, also known as the Rainy Day Fund, to the undesignated General Fund balance to help offset the anticipated shortfall; in addition, the planned deposit on June 30, 2020 will not be made
- Implementation of a statewide hiring freeze with the exception of COVID-19 related needs
- Ongoing review and approval by the Office of Management and Budget of department spending and contracting
- Cancelling and reserving of pre-encumbrances, which will result in deferral or elimination of planned department spending
Additionally, to help offset the anticipated billions in lost revenue, the report proposes decreasing planned spending by over $5 billion, including:
- $1.3 billion in proposed deappropriations
- $3.2 billion in cut or delayed first quarter appropriations, and
- Withdrawal of $849.7 million in proposed spending priorities put forth by the Governor in February
As always, the CCSNJ will keep you apprised to all state budget updates as they are announced and looks forward to participating in the amended budget process later this year.
Please reach out to Hilary Chebra, Manager. Government Affairs at
hchebra@chambersnj.com if you have any questions.
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