Trump's SALT Cap Is a Hurdle for Balanced N.J. Budget, S&P Says
(Bloomberg) -- The ripple effect of the new federal limit on state and local tax deductions may make it all the harder for New Jersey to balance its budget this year, according to a report by S&P Global Ratings.
S&P said New Jersey income-tax revenue was down 4.8 percent in January -- and 6 percent so far for the fiscal year ending in June. That’s off the 5.4 percent growth forecast in the budget, in part because officials in New Jersey and other high-tax states struggled to predict how much income residents would shift into 2017 before President Donald Trump’s tax overhaul took effect.
Governor Phil Murphy, who last year avoided a last-minute state shutdown after fellow Democrats rejected his higher sales tax and levies on millionaires, is set to make his fiscal 2020 budget address on March 5. The potential budget pain for this fiscal year, though, is an immediate matter: While the state tends to receive a wave of payments in April, S&P said it may not be enough to fill the hole left by prior months.
“The extended revenue shortfalls in the first half of the year will make catching up by the end of the year more difficult, even if currently slow revenue trends reverse,” wrote analysts David Hitchcock in New York and Timothy Little in Chicago.
Short revenue in past years, New Jersey governors resorted to skipping or reducing pension payments, making the system among the least-funded among U.S. state governments. Murphy has pledged to pay 70 percent of the contribution recommended by actuaries in the 2020 budget year, according to S&P, compared with the 60 percent budgeted for 2019.
State officials “intend to wait until after the April income tax filing deadline before we make any definitive conclusions about the year’s total revenues,” Jennifer Sciortino, a treasury spokeswoman, said in an email.
©2019 Bloomberg L.P.