Treasury officials are proposing massive budget cuts to make up for tumbling revenues amid the COVID-19 crisis.
To make up for projected declines in sales, income and business taxes this year and next that total more than $9 billion, officials are preparing to pull more than $5 billion from next year’s budget.
The state government has already instituted a hiring freeze, tapped the entirety of its $421 million rainy day fund and placed almost $1 billion of this fiscal year’s appropriations into reserves.
On top of $1.3 billion in planned cuts Treasurer Elizabeth Muoio announced Friday Morning, the Gov. Phil Murphy’s administration is urging $3.2 billion in cuts or delays to first-quarter appropriations and the withdrawal of Nearly $850 million in funding for priorities the governor announced in his February budget address.
The state’s major revenues have all taken sharp dives, and the figures are expected to get even worse in 2021.
Gross income tax revenue is expected to drop 5.4%, or $911 million, this year and by roughly $4 billion next year — a decline of 22% from February forecasts.
Sales tax revenues are expected to fall 10.9%, or $1.1 billion, for the 2020 fiscal year and by $1.5 billion, or 14.2%, next year.
There’s also bad news for businesses. Though revenues from the state’s corporate business tax are only expected to take an 11.6% hit in the current fiscal year—that’s a decrease of about $452 million—treasury officials project they’ll drop by 32%, or $1.2 billion, next year.
“As a state, we had made great strides over the last two years to improve our fiscal condition. However, the global pandemic sparked by COVID-19 has halted this progress in its tracks,” Muoio said. “Managing this unprecedented fiscal crisis will require extremely difficult decisions in the weeks and months ahead, and will necessitate a combination of budget and appropriation adjustments, critically needed borrowing, and more robust federal assistance.”