No easy budget options for Corzine

Gov. Corzine has options on New Jersey's budget, but few of them will sound appealing to residents, mayors, or other state officials who, like him, are up for reelection this year.

Corzine is considering raising income taxes on the wealthy, increasing the levies on wine and liquor, and forcing state workers to take 12 days of unpaid furloughs - one per month in the next fiscal year, according to people involved in budget discussions. The ideas were raised in what was described as a "brainstorming" session with lawmakers last week.

With a $7 billion budget gap projected because of plunging revenue, other ideas include slashing property-tax rebates, cutting support for hospitals, and reducing aid to towns - which would put more pressure on property taxes.

Corzine aides cautioned that final decisions for the March 10 budget introduction had not been made. The tax increases, particularly those on alcohol, would face stiff resistance from some lawmakers and may not make it to the governor's final proposal.

Corzine spokesman Sean Darcy would not comment on specific plans. "Everything is still on the table. All options are open in this unprecedented national fiscal crisis," Darcy said.

Corzine has stressed that tax hikes would be a last resort, and some lawmakers had predicted he would avoid that option. But officials made it clear last week that the revenue outlook was bleak.

Without additional state income, Corzine would have to cut spending roughly 10 percent from the $32.9 billion budget signed last year. More than $1 billion of those reductions have already been put in place as the economy has faltered.

The budget, including any rebate cuts or tax hikes, requires legislative approval. The 80-member Assembly, like Corzine, is up for election in November. The Senate is not, but Senate Majority Leader Stephen Sweeney (D., Gloucester) said: "There'll be resistance to tax increases."

"Before we ask for more, we have to cut more," he said.

He was among a number of Democratic lawmakers who met with Corzine on Thursday. They emerged with grim faces.

"This may be the most dire budget situation that I have seen in all my years in the Legislature," said Assembly Speaker Joseph J. Roberts Jr. (D., Camden), an assemblyman since 1987. "There are bad choices, and there are worse choices."

The furloughs would affect 66,000 executive-branch workers and about 10,000 in the judiciary and legislative branches if they went along. Corzine has called for a wage freeze, but has also said he will have to use furloughs or layoffs if there is no agreement with the state's labor unions.

He has already planned two days of unpaid furloughs, one in May and one in June, to save $35 million in the current budget. A dozen would save about $200 million.

The tax ideas on the table would raise less than $500 million for a budget expected to be around $29 billion or $30 billion, said an administration official who would talk about the plans only on the condition of anonymity.

One being considered is a surcharge of 5 percent or less on incomes of $250,000 or more. About 125,000 tax returns, or 4 percent, were in that range in 2006, the last year for which statistics are available.

Another target, the cigarette tax, has been raised four times since 2002, including by Corzine in 2006. New Jersey has the highest cigarette tax in the nation. Corzine also proposed alcohol-tax increases in 2006, but the idea was dropped in negotiations with the Legislature. Higher wine and liquor taxes - though not a higher beer tax - are again under consideration, three people involved in budget talks said.

Critics say the backlash over raising the alcohol tax would not be worth the relatively minor boost in revenue.

Corzine has not raised taxes since 2006, but he has refused to rule them out this year.

Roberts and Senate President Richard J. Codey (D., Essex) said they expected to preserve the tax rebates for senior citizens, but made it clear that the checks for everyone else could be reduced or eliminated. "Our goal with the rebates has to be to absolutely preserve them for senior citizens and do the best we can to provide maximum property-tax relief to all other working families in New Jersey," Roberts said after the Thursday meeting with Corzine.

Added Codey: "The rebates for seniors will be kept. There's no question about that."

About 500,000 senior-citizen homeowners and one million non-senior homeowners receive rebates. For non-seniors, the checks averaged just under $1,000. They were about $1,200, on average, for seniors.

The program cost about $1.7 billion, with $1.1 billion going to non-senior homeowners.

Roberts said that the rebates should be one of the last items cut, but that keeping them would mean bigger hits to other areas, such as aid to towns.

"What we're trying to do is look at the property-tax bill as a total," he said.

In mid-February, Corzine projected that state revenue would be down to 2005 and 2006 levels next fiscal year.

That could force cuts in aid to towns and hospitals. Corzine has stressed protecting education, so schools might escape a reduction and instead receive flat aid or only limited increases, two people involved in the planning said.

"I think the public understands there's going to be a lot of choices in here that nobody likes," Corzine said last week. "But the fact is we have dramatically lower revenues, and with those lower revenues we're going to have to curtail some things that we might otherwise want to do."