NJ enters 2008 with budget woes

January 1, 2008 3:15:16 PM PST
With Gov. Jon S. Corzine finalizing plans to increase highway tolls to help solve the state's chronic fiscal woes, New Jersey enters 2008 with the nation's third largest budget deficit, according to a new analysis.Corzine is weighing plans to boost Garden State Parkway and New Jersey Turnpike tolls to pay state debt. He plans to introduce his plan to the Legislature on Jan. 8.

But the state also faces a projected budget deficit of up to $3 billion for the fiscal year that starts July 1, a hole that comes with Democrats looking to increase state aid for schools by about $580 million.

A recent review by the Center on Budget and Policy Priorities found 13 states, including several of the nation's largest, face budget shortfalls next year. Only California and New York face larger gaps than New Jersey.

California faces a deficit that could be as large as $14 billion, while New York faces a projected $4.3 billion shortfall, the review found.

The center cited housing market troubles as a leading cause for state fiscal woes, cutting sales tax collections from the sales of homes, furniture, appliances and construction materials, but New Jersey has had annual budget deficits since 2001.

It has solved them by, among other moves, increasing income taxes, corporate taxes, cigarette taxes and sales taxes.

In 2006, the Garden State increased sales, corporate, cigarette and other taxes by $1.84 billion, easily the largest total tax increase among states that year, though it avoided tax increases in 2007 when Democrats who control the Legislature faced re-election. They kept their control in last November's election.

Corzine hasn't ruled out tax increases in 2008, but hasn't indicated he will propose increasing any, either. He has noted state taxes are considered high, and The Tax Foundation recently determined New Jersey has the nation's third-highest tax burden. Rather, Corzine has asked his administration to present ideas to cut $3 billion from the state's $33.5 billion budget.

And he's pitching his toll plan as a long-term solution.

He hasn't said how much tolls may increase, though at least a 45 percent increase is necessary to widen the Turnpike and fix bridges on it and the Parkway.

Corzine wants to use money from the deal to pay at least half of the $32 billion in state debt and provide money for transportation needs.

"Without reducing our debt burden, our financial situation will not allow us to make needed investments in critical infrastructure or rationally balance the books," Corzine said. "That doesn't mean we can't and it doesn't mean we won't reduce spending. We can, and we will. But it is the ever-increasing debt burden that is sucking the life out of the state's finances and our ability to serve our citizens."

State debt has doubled since 2000 and is costing the state about $3 billion this year.

The state's fiscal forecast for 2008 could worsen - or improve - based on how much tax revenue is collected in coming months when money from holiday shopping and April income tax returns is realized.

"We will be in a better position to plan for the next fiscal year's budget when we see how revenues perform over December and January," said acting state Treasurer Michellene Davis.

But the budget woes have Republicans questioning how the state can afford Corzine's plan to boost school aid by $583 million. "We don't have the money for this," said Assembly Minority Leader Alex DeCroce, R-Morris.

He predicted Corzine "is going to ask the taxpayers to empty their wallets to support the new spending."

Corzine and Democrats said the money will be found.

"Many things that we have advocated for will have to be pared back or eliminated in order to pay for this," said Assembly Budget Chairman Lou Greenwald, D-Camden.