Revenue Problems Persist

New Jersey’s latest figures show dwindling state income tax and corporate tax revenues.  The new hole—$440 million—has left the Corzine administration scrambling to find additional cuts in its proposed 2006-07 budget and has given legislators little hope of forestalling a proposed sales tax increase.

State Treasurer Bradley Abelow told the Senate Budget and Appropriations Committee on Monday that the state budget deficit has reached nearly $5 billion.  In March, Governor Corzine proposed a one-cent increase in the state sales tax—along with fee increases and spending cuts—to close a projected $4.5 billion gap in the budget.

But with a growing budget gap, the sales tax strategy—not popular among many in the Legislature—would not do the trick alone.  Senator Wayne Bryant, who chairs the Senate committee, said in a published report this week, “There’s no way possible that we cannot look at this budget without additional cuts.”

Corzine’s pledge to increase property tax rebates for the state’s disabled and senior citizens has been singled out as one possible reduction.  Reducing New Jersey SAVER rebates is another.  However, finding additional budget cuts that would allow the Corzine administration to nix its proposed tax increase would be a difficult task, without affecting school and municipal aid, according to Abelow.

Since the state budget was first released in March, the treasury department has announced saving $26 million by trimming some of the governor’s plans for building child advocacy centers, instituting more after-school programs, and other initiatives that would benefit students with special needs.

June 30 is the deadline for approval of the state budget.

Abbott Aid Clarified
The New Jersey Supreme Court ruled this week that the state must pay for additional costs related to new schools scheduled to open in its poorer districts this fall.

The court issued its decision on Monday to clarify an earlier ruling this month in which it gave the state permission to tell its “special needs” school districts that they must operate this fiscal year with little to no increase in state aid.  The districts can appeal the amount of state aid they receive.

However, the latest court ruling held that New Jersey must pick up the costs associated with opening new schools in the Abbott districts, even if the state has to kick in more aid.

Under a series of decisions in Abbott v. Burke, state aid levels to 31 poor, “special needs” school districts are mandated by the state Supreme Court.  But because of the state’s looming budget deficit for 2006-07, the court has relaxed some of its rules, at the request of the governor.