OLS
Frank Haines, OLS's legislative budget and finance officer, addressing the state Senate Budget and Appropriations Committee.
(Samantha Marcus | NJ Advance Media for NJ.com)
TRENTON -- New Jersey tax collections will come in about $162.1 million short of Gov. Chris Christie's expectations for the current and upcoming fiscal year, the nonpartisan Office of Legislative Services told lawmakers Tuesday.
Christie and OLS are just $73.2 million apart on their estimates for the three months remaining in the current fiscal year and $88.9 million apart for the fiscal year beginning July 1.
It's a relatively meager disparity in the context of $34.8 billion in proposed spending, and is helped by the nonpartisan office and the administration's similar projections for the all-important gross income tax, which accounts for 40 percent of the state's revenue.
Even still, OLS officials stressed to the Senate Budget and Appropriations Committee the difficulty in pegging down uncertain taxes that can be thrown off by lackluster Wall Street bonuses, corporate accounting maneuvers, higher-than-normal tax refund payments or the loss of one very wealthy resident.
"The top 1 percent of taxpayers provide over 35 percent of the state's gross income tax receipts, while just the top 100 filers pay over 5.5 percent of all (gross income tax) payments," Acting Treasurer Ford M. Scudder said.
"That inherently makes the tax system much more volatile and much more difficult to predict a year out," he said.
If revenue forecasts are off by just one percent next year, OLS Revenue, Finance and Appropriations Chief Catherine Brennan noted during her testimony, there will be a $347.4 million shortfall, 44 percent of the estimated $787 million surplus.
Both OLS and the treasurer cited the loss of New Jersey's wealthiest resident, billionaire David Tepper, who relocated to Florida, as a potential complication.
"We may be facing an unusual degree of income tax forecast risk if news reports are true that the person ranked by Forbes Magazine as the wealthiest New Jersey resident has shifted personal and business domicile to another state," said Frank Haines, OLS's Legislative Budget and Finance officer.
While OLS provides the Legislature revenue estimates, the administration is ultimately responsible for certifying revenues. In recent years, OLS projected steep shortfalls, but this year and last the estimates have been close.
Below the surface, OLS and the administration offer different takes on expectations of corporation business tax, inheritance tax and cigarette tax collections. The greatest departure is in corporation business tax receipts, where OLS is predicting the state will collect $56 million less than the treasurer predicts for the rest of this fiscal year, and $156 million for the fiscal year that begins July 1.
Brennan, calling the corporation business taxes "the most difficult revenues to forecast each year," said business tax credits will chip away $113.7 million this year and $454.2 million next year.
"Indeed, the impact of tax credits is likely to become an increasingly important factor with respect to (corporate business tax) collections, and is a more pronounced factor in the OLS estimates," Brennan said.
OLS also expects the cigarette tax will generate $51 million more and the inheritance taxes $83.4 million more than what the administration is projecting for the two fiscal years.
The revenue estimates kick off the Legislature's department-by-department review of Christie's $34.8 billion budget plan.
Committee Chairman Sen. Paul Sarlo (D-Bergen) said the governor sent the Legislature a budget with "significant common ground and he's committed to striking a budget deal with Christie.
But he grilled OLS officials and Scudder over what he considered the biggest open question in the proposed budget: funding for the Transportation Trust Fund. The proposed budget includes $1.6 billion for road and bridge improvements next year but no way to pay for it.
Scudder told the committee he's confident Christie and the Legislature will strike a deal this spring.
Democrats want to raise the 14.5 cent-per-gallon gas tax to fill the fund, but Christie has said it must be part of a discussion of "tax fairness."
"We have an obligation here to replenish the TTF once and for all, with no more Band-aids and no more gimmicks," Sarlo said.
Samantha Marcus may be reached at smarcus@njadvancemedia.com. Follow her on Twitter @samanthamarcus. Find NJ.com Politics on Facebook.