As reported by nj.com, the Christie administration has advised Wall Street that the State’s share of unemployment and Medicaid costs are expected to rise above expectations against a backdrop of lagging revenue collections, according to an amended report filed Monday. The State also warned Wall Street that the combination of rising costs and slumping revenue may force the administration to make difficult mid-year changes, which could mean cuts, in the $31.7 billion spending plan.
This is a much more somber tone than Governor Chris Christie has struck in public when talking about the State’s budget and economic outlook. Although revenues have grown modestly during the first three months of the fiscal year that began in July, they are $175 million, or 4%, less than Christie projected. The biggest shortfalls were in sales tax collections, which fell nearly 7 percent short of Christie’s projections, the State disclosed. Income tax collections, the most important revenue source, are doing better than expected.
Christie’s revenue estimates for the fiscal year have come under intense scrutiny since he used robust projected growth as evidence of a “Jersey Comeback” in January. The expected 7.4 percent growth rate is among the highest in the nation, but now collections must grow closer to 10 percent to make up for the slower-than-expected revenue thus far. Since January, the unemployment rate has swelled and the State has repeatedly failed to reach its revenue targets.
Christie has also said that revenues are growing enough to pay for a Democratic-sponsored plan to provide an income tax credit equal to 10 percent of residents’ property tax bills. But Democrats believe enacting the cut in this economic climate is reckless and have blocked the Governor’s attempt. “This is just another reason to be concerned about the dire fiscal situation in Chris Christie’s New Jersey,” said Assemblyman Vincent Prieto, chair of the Assembly Budget Committee. “As the people of New Jersey want and support, Assembly Democrats will continue to be fiscally responsible, and hopefully Governor Christie finally decide to join us in that effort and will put aside this ridiculous notion that everything is just fine.”
The State also advised Wall Street that there may be problems on the spending side. Federal subsidies for unemployment payments and other related benefits are expected to expire in December, forcing more costs to the State. In addition, the Medicaid waiver that was recently approved by the federal government took longer than expected and will not capture the expected savings, the State advised. “The above situations may impact the projected ending balance for fiscal year 2013. As a result, other budgetary actions may become necessary during the course of fiscal year 2013,” the State warned.