OLS revenue forecasts largely in line with Treasury predictions

The Office of Legislative Services’ picture of New Jersey finances isn’t much rosier than what Treasury officials announced last week.

“Our forecast in total is, over the 15 months that we’re forecasting, is about just short of half a billion dollars higher than their forecast,” OLS senior fiscal analyst David Drescher told the Assembly Budget Committee during a remote hearing Thursday.

Differences in sales tax projections account for the bulk of the roughly $500 million, with OLS projecting the tax to return about $350 million more than Treasury officials predicted.

The discrepancy between the sales tax and other revenues was partly attributed to the relative recency of OLS’s projections, Drescher said.

“We finalized our forecast last night. The executives’ were produced a few weeks ago,” he said. “I think we have a somewhat more optimistic view about at least the immediate future of the sales tax.”

But OLS officials stressed that much was uncertain about the coming months.

The non-partisan office did not produce an analysis for the nine-month 2021 fiscal year because of that uncertainty, and OLS officials more than once warned that forecasts relating to the three-month extension to the current fiscal year could change if COVID-19 surges again.

In either case, they aren’t predicting a return to a pre-virus economy in the short term.

“I’d say it’s possible, but it seems less possible than it did a month ago,” Drescher said when asked whether New Jersey could return to its pre-pandemic economy within two years.

Further, there’s little clarity about how the state’s tourism economy will fare during the summer months.

“While we may see a reduced tourism activity, we also have more people that are now staying home,” OLS revenue analyst Jordan Giovanni said. “They’re going to be in New Jersey spending their money as opposed to going to Maine, for example … to vacation as well and spend [their] money there instead of New Jersey.”

July sales tax collections, which reflect June consumption, are the second highest of the year, and those figures are buoyed by tourism spending.

State Treasurer Elizabeth Muoio repeated warnings that the state would likely face significant cuts — both to spending and staffing — before it emerged from the crisis and again urged the need for additional federal aid.

“Today’s testimony from State Treasurer Elizabeth Muoio and the Office of Legislative Services makes it abundantly clear that we all have our work cut out for us as we look to manage the current fiscal crisis,” said Assembly Budget Chairwoman Eliana Pintor Marin (D-Newark). “The COVID-19 pandemic has caused an economic crisis unlike the world has seen since the Great Depression nearly a century ago. We will have to make many difficult choices while also doing all we can to produce a spending plan that best serves the State’s working families and businesses.”