Bloomberg: New Jersey's Budget Shortfall Reaches $3.6 Billion

Following up on yesterday's piece [Kansas Joins California in Budget Woes] New Jersey increases its projected deficit by a whopping 71% from the "guess" 30 days ago. Someone must have been drinking Kool Aid in the finance office. Just shows, yet again, how much denial there is out there on how bad it is... and how quickly things are degrading. But never fear - newly printed federal money is on the way.

Folks, we're going to be in even worse shape in 2010 as unemployment continues up, real estate values continue down, etc. (remember state budgets run from summer of one year to summer of the next) Let's begin the groundwork for New Deal Stimulus 3.0.... I believe that one will steal not from your grandchildren (who we've already bankrupted), but your grandchildren's grandchildren. All these benefit increases, early retirements, and "promises to the moon" we've handed out at city council meetings and in state legislatures eventually come home to roost. Oh well, hopefully the American birth rate increases from 2.1 per family to 4.5 - we're gonna need an army of new taxpayers to foot these bills. Or we could come to realization we have to rescind these ridiculous promises .... nah, the army of grandkids it is.

My solution? Pull a Hoboken on the whole state! [Dec 4, 2008: Bloomberg - Hoboken New Jersey Increases Taxes 47%]

• New Jersey’s budget shortfall for the current fiscal year is now $3.6 billion, up from a projection of $2.1 billion a month ago, according to a handout from Governor Jon Corzine’s office.
• State revenue collections fell $526 million short of budget estimates last month, Treasurer David Rousseau said in a statement today. Through January, total revenue is $1.33 billion under target for fiscal 2009, which ends June 30. “We are flat-lining with regard to revenue,” Corzine, 62, said to reporters today in Trenton.
• Corzine said his administration has identified $472 million in additional spending cuts to help balance the budget. Those reductions include forcing state workers to take two unpaid days off in May and June, for savings of $35 million, he said. He also said the state will conduct a $100 million “tax amnesty” to entice delinquent taxpayers to settle up.
• The governor said the shortfall includes a $2.8 billion deficiency in revenue and an additional $800 million in spending needs. Among those needs is a replenishment of the state’s unemployment benefits fund to prevent a statutory tax increase on employers, he said.
• Fiscal 2009 spending levels are now expected to come in at $31.6 billion, more than $4 billion less than projections when the budget process began last year.
  
• The state expects to receive about $850 million from the federal stimulus package to be signed today by President Barack Obama, Corzine said. (I'm glad I could help you out state employees of New Jersey) Corzine told reporters today that state worker unions are fighting his call for an 18-month wage freeze, and firings may be necessary if his administration can’t reduce salary costs through furloughs or withholding raises.

I continue to be bemused that the cuts that are allowed to happen in private enterprise are considered a travesty in the public sector. A wage freeze for 18 months in the worst economy since the Great Depression?? When millions in the private sector lose their jobs? An outrage!

Reader 'jegan' submitted this link from the Center on Budget and Policy Priorities. The last point I highlighted is exactly the premise I was proposing in 2007 on why exactly we are so in trouble this time around - all primary revenue streams are in structural and/or cyclical free fall. Judging from the graphs in the link the states most in trouble in fiscal 09 are: Alabama, Arizona, California, Connecticut, Florida, Georgia, Illinois, Rhode Island, South Carolina, and Utah. All of these have at least a 10% shortfall (gap) in their budget. Scary to think Kansas, which we highlighted yesterday is one of the best! Fiscal 2010? Don't ask.

• At least 46 states faced or are facing shortfalls in their budgets for this and/or next year, and severe fiscal problems are highly likely to continue into the following year as well. Combined budget gaps for the remainder of this fiscal year and state fiscal years 2010 and 2011 are estimated to total more than $350 billion.
• States are currently at the mid-point of fiscal year 2009 — which started July 1 in most states — and are in the process of preparing their budgets for the next year. Over half the states had already cut spending, used reserves, or raised revenues in order to adopt a balanced budget for the current fiscal year — which started July 1 in most states. Now, their budgets have fallen out of balance again. New gaps of $51 billion (over 10% of state budgets) have opened up in the budgets of at least 42 states plus the District of Columbia.
  
• It may be particularly difficult for states to recover from the current fiscal situation. Housing markets may be slow to fully recover; the decline in housing markets has already depressed consumption and sales taxes as people refrain from buying furniture, appliances, construction materials, and the like. Property tax revenues are also affected, and local governments will be looking to states to help address the squeeze on local and education budgets. And as the employment situation continues to deteriorate, income tax revenues will weaken further and there will be further downward pressure on sales tax revenues as consumers are reluctant or unable to spend.