State Budget Wrap

The state budget process officially concluded with the release last Friday of Gov. Chris Christie’s line-item veto of S-2013, the $31.7 billion appropriations bill for fiscal 2012-13. Direct aid for public schools remained unchanged from the amounts recommended by the governor in his budget proposal delivered to the Legislature last February.

The governor’s veto included a $4 million cut for non-public school technology and an $18.9 million reduction in teachers’ pension and annuity assistance based on the latest actuarial valuation approved by the pension fund board.

Earlier, the Legislature had removed language that tied the recommended amounts for school aid to the assumptions included in the Education Funding Report (EFR) released simultaneously with the governor’s budget in February. This means that the calculation of school district populations will remain the Oct. 15 census, and not shift to average daily enrollment as called for in the funding report. It is expected that a formal proposal will be submitted to the Legislature this fall, and it will likely include recommendations from the EFR, including the proposed change in student counts.

Special Session On Monday the governor convened a special legislative session to request that the Senate and Assembly take action to approve a plan to cut the income tax liability for New Jersey residents. The governor endorsed the plan put forward by Senate President Stephen Sweeney, which would provide an additional deduction on state income tax returns equivalent to 10 percent of property tax bills for people with household incomes below $250,000. A family that pays $7,500 in property taxes would receive an additional $750 credit against their state income tax liability; a family that pays $10,000 would receive a $1,000 credit. For renters, the current $50 property tax credit would be increased to $200.

Delayed Income Tax Cut The Democrat-controlled Legislature approved a budget with set-aside funding for a phased-in tax cut to be approved in January – after it was determined that state revenues were indeed sufficient to warrant this reduction. The governor exhorted legislators to give their approval to the income tax reduction plan immediately.

NJSBA has taken no position on these proposals. However, NJSBA has raised a concern that, since the state income tax is the mainstay of state funding for public education, some consideration should be given to guarantee that any cuts to this revenue stream would not undermine the state’s ability to fund the statutory state aid formula.