(The Center Square) – New Jersey is facing a nearly $10 billion revenue shortfall through the end of fiscal year 2021, according to a report issued by state Treasurer Elizabeth Maher Muoio.
A $2.72 billion deficit is projected for the remainder of fiscal 2020, which was extended from June 30 to Sept. 30. A deficit of $7.2 billion is projected by the end of fiscal 2021.
The state saw a steep decline in revenues in April. Overall revenue collections were down 59.7 percent, led by a 60 percent to 90 percent decline in corporate and individual tax filings as businesses deemed nonessential were forced to shut down and lay off workers because of restrictions meant to slow the spread of COVID-19. Gov. Phil Murphy also moved the income and corporate tax deadline from April to July.
Sales tax collections were down 13.7 percent from last year and employer withholdings decreased 7 percent from comparable weeks in April a year ago.
The situation could be worse in the next few months, Muoio said.
Collections are projected to decline 33 percent from May to July over the same period last year, Muoio said. The worst sales tax month during the 2008-2009 recession was a decline of 18.4 percent.
“As it was not until the middle of the month that non-essential businesses were ordered to close, April collections do not fully capture the impact of the economic shutdown,” according to the report. “Moreover, March sales benefited from consumers buying in preparation for the lockdown. Similarly, unemployment insurance claims steadily rose over the course of April, suggesting that the full impact of the job losses will not be felt until May.”
The state implemented a statewide hiring freeze and limited hourly and temporary employees to reduce costs.
The Treasury Department is also working the Office of Management and Budget to review spending and contracting, according to the report. And the rainy-day fund will “easily be depleted,” Muoio said.
The state will need a combination of budget tightening, critically needed borrowing and “much more robust federal assistance,” she said.
Murphy once again on Friday called for direct financial assistance to states from the federal government, saying it was not a “bailout.”
“Every day, this becomes a more and more bipartisan endeavor,” Murphy said. “But there are just as many minds that remain closed and intractable.”
Assemblyman John DiMaio proposes a plan that would allow some New Jersey residents to defer their federal taxes and pay state taxes at the federal rate to offset budget shortfalls.
“The state shouldn’t be asking for a federal bailout because of years of poor fiscal management,” DiMaio said in a statement. “But our political system needs a market correction. New Jersey annually gives far more tax dollars to the federal government than we get back. This plan doesn’t ask for taxpayers across the nation to fix our problems, it asks to let us fix our own problems.”