New Jersey is slated to see a $10 billion budget hole through the end of June 2021, according to preliminary data from the state Treasury, as the COVID-19 pandemic slams the global economy and wrecks the state’s finances.
That’s still an amount far less than the worst-case-scenario $30 billion hole in the state’s budget frequently laid out by Gov. Phil Murphy at public appearances, but state officials maintain that a lot is still up in the air.
“Based on a wide variety of economic assumptions, the State of New Jersey may be looking at a combined $10.104 billion revenue shortfall over the remaining months of Fiscal Year 2020 through the end of Fiscal Year 2021,” State Treasurer Elizabeth Maher Muoio said in the Wednesday evening statement.
“While there are many moving parts, what is clear is that this decline would be worse than the Great Recession,” Muoio added.
Of that, a $2.75 billion shortfall is expected through the end of the current budget, which now closes on Sept. 30 rather than June 30, so that the administration can gather more tax filings submitted by the extended July 15 tax deadline.
That means the state can expect to close out the year with a $36.7 billion budget, rather than the $39.4 billion that Murphy signed in June last year.
Looking ahead through the end of June 2021, which would encompass the 2021 fiscal year for the state, New Jersey can expect a $7.3 billion shortfall.
That means Murphy could end up signing a $33.8 billion budget come Sept. 30, rather than the $41 billion spending plan he unveiled in February.
Between April 2019 and last month, the state saw a 60 percent drop in its tax revenue collections, the Treasury announced yesterday, but much of that was due to tax filings that would typically come in ahead of the April 15 deadline
The projections do not make any mention of the governor’s proposed taxes, such as a cigarette tax increase or the millionaire’s tax, and it is not certain how those would be impacted by the recession.
“There is a significant amount of fiscal uncertainty right now stemming from revenue losses and budgetary demands caused by the COVID-19 pandemic,” Alyana Alfaro Post, a spokesperson for the governor’s office, said in a statement Wednesday.
“This figure is one of many estimates that could become a reality for New Jersey depending on factors like revenue collection and federal funding,” she added, saying that the projections do not even account for “many of the increased costs for COVID-related expenses and increased demand for many social services.”
Responses to the outbreak by Murphy and other governors nationwide entailed placing their respective states on near-total lockdown and closing businesses en masse. The move has shown many signs of working, but in the process has ground commerce to a halt—driving up unemployment and causing major slashes in the taxes on which the state relies: corporation, income, sales, gas, casino and lottery sales, as well as fares and tolls.
“These numbers are a sobering reminder that the COVID-19 impact is not limited to the health of our people, but also to the health of our state’s finances,” Murphy said in Trenton on Wednesday.
Murphy has begun warning that the state is teetering on the edge of “financial disaster” in a matter of weeks, that could entail deep cuts to state services across the board.
In addition to the federal aid, the governor wants to borrow at least $5 billion through a Federal Reserve program for immediate, short-term cash.
Senate President Stephen Sweeney, D-3rd District, has shown wariness of that plan, and has instead floated furloughing up to 100,000 state and local workers, which he argued could save the state roughly $750 million.