New Jersey will collect about $59.2 billion in revenue in the coming July-to-June fiscal year, forecasters from the Treasury and the nonpartisan Office of Legislative Services agreed in updated projections shared with lawmakers Tuesday.
If the projections hold, higher state revenue would slightly reduce New Jersey’s structural deficit and leave the state with nearly $6 billion in reserves. Still, officials warned of uncertainty that could disrupt financial markets and hit tax collections in the next fiscal year.
“The outlook for this year is good and the outlook for next year is cautious in the face of ongoing uncertainties,” State Treasurer Aaron Binder told the Senate Budget Committee Tuesday.
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The May revenue update follows tax payments in April, and it is a key step for legislators as they move out of budgetary hearings with state department heads and into the final steps of drafting the annual spending bill they must pass before July 1.
The projected $6 billion in surplus is up from the $5.4 billion Gov. Mikie Sherrill proposed in her budget address in March. Sherrill’s budget plan costs $60.7 billion, a record amount.
The proposed surplus, which equals about 9.8% of the spending the governor has proposed for the coming fiscal year, was also boosted by lapses and shifts in supplemental spending that, on net, reduced state costs by roughly $50 million, Binder said.
The increased resources would also cut New Jersey’s deficit — the difference between its spending and revenue — to about $1.45 billion, from the roughly $1.6 billion Sherrill initially proposed.
Binder said the additional funds did not change Sherrill’s posture on new spending added to the budget. Lawmakers traditionally add spending to a governor’s budget proposal before sending it back for the governor’s signature.
“I think the governor stands by initial comments that where we have growth in spending, that we’d like to find offsetting reductions,” Binder said, adding the Legislature and governor would determine the fate of those monies through budget negotiations.
Sen. Paul Sarlo (D-Bergen), who chairs the budget panel, asked Binder whether the administration had considered using the additional revenue to boost state education aid.
“I think you’ll hear during this process members from both sides of the aisle asking for that consideration,” Sarlo said.
School aid is the largest single part of New Jersey’s annual budget. This year’s spending proposal includes more than $12.4 billion in school aid, though some districts still experience reductions in their aid allotments.
Other districts have said they are receiving less than their share of aid because of language, first enacted last year and which Sherrill has proposed extending, that limits state aid decreases to 3% and increases to 6%.
Officials from both branches warned that great uncertainty still surrounded the projections for the 2027 fiscal year.
“In our view, the uncertainty that existed in April remains largely unresolved,” said Oscar Mendez, a revenue and economic policy analyst for the Office of Legislative Services.
Uncertainty around the health of the economy, trade, monetary policy, and geopolitics would contribute to slow growth in the next fiscal year, when revenue is expected to increase by 2.5%, Mendez said.
That rate of growth would trail the rate of inflation, Mendez said.
Tax proposals Sherrill made that were tied to World Cup matches planned for East Rutherford in June and July are not scored in the budget, and Sarlo said they have gotten a mixed reception from legislators.
The governor had pitched adding a 3% sales tax surcharge in the Meadowlands and fees for ride shares there and hotel stays in most parts of the state in a bid to offset the costs New Jersey faces from hosting the World Cup.
“At the end of the day, there’s parts of the Legislature who can live with certain components who can’t live with other components,” Sarlo said, adding some proposals were preempted by agreements with FIFA.
Sherrill told News12 last week that it did not appear those proposals would move forward.
The logistics of enacting the proposals before the first World Cup game at MetLife Stadium on June 13 were also a major hurdle, Sarlo said.
“It’s just a little bit hard logistically to pull that off, and I think that’s the struggle,” he said.
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