TRENTON - New Jersey is facing a "historic tax-revenue collapse" that could leave the state with a $100 million deficit by the end of the next fiscal year.
That was the assessment of Budget and Finance Officer David Rosen of the nonpartisan Office of Legislative Services, who presented his findings to the Senate budget committee yesterday.
"New Jersey finds itself in the most significant revenue downturn in its modern history," Rosen said.
Rosen projected that New Jersey would bring in $606 million less in revenue than previously anticipated by the Corzine administration from the current fiscal year through the end of the next on June 30, 2010.
If that estimate holds true, the state would be forced to make more spending cuts or increase revenue to balance the budget, as required by the state constitution.
Rosen said that only twice in the last four decades did the state's revenue decline from one year to the next. Revenue declined 2.1 percent in fiscal 1975 and 1.9 percent in 2002, he said.
The Office of Legislative Services estimates that revenue for the current fiscal year, which ends June 30, will drop 11 percent from the previous year. For fiscal 2010, OLS projects a decrease of 3.7 percent.
Declining income, sales, and corporate tax revenues helped fuel the projections.
Rosen warned that Corzine's projected year-end balance of $502 million was "especially troubling in a year with so much risk of further revenue volatility," noting that if his office's revenue projections are accurate, there will be a deficit rather than a balance by the end of the year.
"We need to realize the risk in having such a small buffer against adverse events," Rosen said. He later added, "A $500 million surplus is pretty scary."
Corzine proposed a $29.8 billion budget last month. He calculated his budget based on six fewer weeks of revenue data than OLS had.
The governor and the Legislature must agree on a budget by the start of the next fiscal year on July 1, according to the constitution.
State Treasurer David Rousseau, who addressed the Senate budget committee yesterday afternoon, noted that a difference of $600 million over two years of state revenues amounted to less than 1 percent. But he acknowledged that the difference, if accurate, would affect the budget.
Rousseau said the administration would adjust revenue estimates downward if warranted.
"This administration continues to work to find every dollar of savings we can, and we will not shirk our responsibility to provide additional recommendations to balance the [fiscal 2009 and 2010] budgets if further revenue reductions are warranted," Rousseau said.
Rousseau is slated to present new revenue figures in late May, which will include critical April tax collections.
Lawmakers responded along party lines, with Democrats praising Corzine's budget proposal.
Senate Budget Chairwoman Barbara Buono (D., Middlesex), said the budget proposal "represents a rational plan for surviving this economic crisis, and positions us on a path to recovery as the economy stabilizes and begins to grow, as it inevitably will."
Republicans lashed out at the proposed tax increases, repeating the message they seized just minutes after Corzine pitched his budget proposal, arguing that the budget is balanced on the backs of the state's middle class.
"After hearing your remarks today, I can tell why the sky is so gray over the Capitol," said Sen. Anthony Bucco (R., Morris), the ranking Republican on the Senate Budget committee. "I just hope the sky isn't falling."
Lawmakers argued over whether, for example, billions of dollars in federal stimulus money should be counted in the budget or considered "off-budget."
Rousseau said the administration, following standard practice under governors of both parties, considered the dollars "off-budget."
The size of the shortfall in the current budget will not be known until May, when more tax collections are completed, but if the OLS predictions are right, the state could be in a bind, because most of the budget will be spent by then, leaving few areas to cut.
Rosen said one-time infusions of revenue, known as "one-shots," would account for roughly $2.5 billion of any gap in the 2010-11 budget. Among those "one-shots" are nearly $2 billion in stimulus money and $700 million in "one-year" tax increases.
In a written statement, Corzine said the OLS projection "reinforces the argument that we need to be very disciplined and conservative with how we handle this budget process on spending."