Northern Jersey Tax Filing Delay Hampers State Budget Forecast

9 04 2010

TRENTON (AP) — An income tax filing extension granted to millions of residents who live in flood-prone areas of New Jersey could leave state budget officials scrambling to close the books on this fiscal year.

Treasury officials completing their records on the budget year that ends June 30 typically revise their end-of-year revenue forecasts in mid-May, after April’s income tax receipts are tallied.

But residents who live in heavily populated Bergen, Essex, Middlesex, Passaic and seven other counties this week were granted a four-week extension to file their federal and New Jersey tax returns.

That means state analysts won’t be able to forecast year-end revenues until the end of May at the earliest, legislative budget officer David Rosen told a Senate budget panel.

State Treasurer Andrew Eristoff is facing the same situation.

“We won’t know by the end of April how we did on final payments,” Rosen told the panel Thursday. “That obviously is unfortunate for the budget process because the uncertainty is going to linger longer than we are accustomed to having it linger.”

If less revenue than anticipated is collected, Gov. Chris Christie could be forced to make additional late-year budget cuts to keep the budget in balance. Earlier this year, Christie carved out $1.6 billion from 375 programs in the budget he inherited from former Gov. Jon Corzine, including cuts to schools, mass transit and higher

But even the governor’s revised budget estimates may prove too optimistic.

The Office of Legislative Services has revised its revenue outlook downward for the final three months of the current fiscal year and for fiscal year 2011, which starts July 1. The analysis presented to lawmakers this week shows tax revenues could be $82 million shy of projections this year and $168 million less than the governor projected for his first full budget year.

The projections show much of the revenue shortfall from continuing weak sales tax collections, coming off a historic multiyear decline. Between June 2008 and December 2009, sales tax collections declined for 19 straight months, Rosen said. The worst 10 months — between November ’08 and last August — the average monthly decline was nearly 12 percent.

Eristoff told the Senate panel that it’s unlikely the state will meets its sales tax target for the year. That target assumed a 5.1 percent sales tax growth for the rest of the year.

“We’ve seen results from the sales tax that have been disappointing since then,” Eristoff said. “My assumption is that we will have to revise the numbers downward at the close of the fiscal year.”

In a terse exchange with Eristoff, Senate Budget Committee Chairman Paul Sarlo accused the Christie administration of criticizing Corzine’s sales tax estimates then adopting the same numbers.

“There’s a lot of hypocrisy here,” said Sarlo. “I think we all want to move beyond the fairy tales and get to the real numbers.”

“Please don’t call me a hypocrite,” Eristoff shot back.

New Jersey’s budget relies on taxes — corporate business taxes, personal income taxes, sales and cigarette taxes, among others — to fund programs and services. When revenue declines, as it has during the recession, there is less money for the state to spend. The state Constitution requires the governor to maintain a balanced budget.

Even without the tax filing extension, April is such a volatile month for tax collections that budget officials refer to the revenue numbers as the “April surprise.”

(News Source: NJ




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