Nov. 17 (Bloomberg) -- New Jersey may need to make mid-year spending cuts as revenue trails Governor Chris Christie’s estimates, said the Assembly budget panel’s lead Republican.
“I don’t want to instill fear about this, but you can never take that off the table,” Assemblyman Declan O’Scanlon, of Red Bank, said today in an interview at a mayors’ conference in Atlantic City, referring to cuts. New spending reductions “would be very hard and really difficult on everyone.”
Revenue collections missed projections by 3.1 percent in October and 3.4 percent for the first four months of the year that began July 1, Treasurer Andrew Sidamon-Eristoff said yesterday in a statement. Christie administration officials and Republican lawmakers will monitor budget developments and come to a decision by February on whether to make “corrections,” O’Scanlon said. He declined to say what areas may take cuts.
“That’s premature to discuss at this time,” Michael Drewniak, a Christie spokesman, said by e-mail when asked about possible cuts.
Severe weather disrupted collections last month and in September, delaying tax-payment deadlines, hindering travel and causing power outages that curbed retail sales, Sidamon-Eristoff said in his statement.
More Data Needed
“We can’t be 100 percent certain of the real impact on revenue until we have figures on collections from a month when weather was not a factor,” he said.
It’s premature to discuss the need for cuts, Andrew Pratt, a spokesman for the treasurer, said today in a telephone interview. He said the state has planned for both a drop in revenue and an increase.
“We’re constantly monitoring cash flow and revenue,” Pratt said. “We have plans for any scenario that comes up.”
New Jersey’s economy was ranked the third-worst performing among U.S. states in the year through June 30, according to the Bloomberg Economic Evaluation of States Index, which uses data on employment, income, real estate, taxes and local stocks.
The state’s recovery has lagged behind the nation, the three major credit-rating companies said when they each lowered New Jersey’s credit by one step this year. Moody’s Investor’s Service gives the state’s general-obligation debt an Aa3 grade and Standard & Poor’s places it at AA-, both fourth highest.
New Jersey should draw down its reserve, or rainy-day, fund by as much as $300 million as revenue trails projections, said Assembly Budget Chairman Louis Greenwald. Democrats, who control the Legislature, passed a budget in June that would have maintained a $300 million reserve and increased spending on nursing homes, and Christie cut that to raise the surplus to $600 million, Greenwald said.
While both Republicans and Democrats projected higher revenue than initially estimated by Christie for his fiscal 2012 budget, they disagreed on the degree of the increase in May. Sidamon-Eristoff said it would be about $342 million, while the nonpartisan Legislative Services Office put the increase at about $914 million. The finished budget reflected the Republicans’ forecast.
“We flatly rejected the Democratic leadership’s fairy tale revenue projections for fiscal year 2012, which they tried to use to justify a return to their out-of-control spending,” Drewniak said in his e-mail. “Imagine where we’d potentially be mid-year had we gotten back on that crazy train.”
Greenwald, a Democrat from Cherry Hill, said the state should redirect the money to bolster nursing homes and the health-care system, which he said is a steady creator of jobs. Greenwald said he hopes to avoid cuts in the second half of the fiscal year, which ends in June.
“This is why we have a surplus,” he said. “I don’t think we need to start making cuts yet.”
--Editors: Stacie Servetah, Ted Bunker.
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