When the first half of the state’s fiscal year ended last month, New Jersey’s total tax collections were off nearly $530 million from the same point in the previous fiscal year.
In all, the state’s revenue haul from the beginning of July through the end of December declined by nearly 3% compared with the same six months in the fiscal year that ended June 30, 2023, the Department of the Treasury reported Wednesday.
Some of state government’s largest individual sources of revenue, including the income and corporation-business taxes, are among those seeing year over year declines this fiscal year, according to Treasury.
To be sure, a modest slowdown in overall collections was predicted for the first half of the fiscal year as inflation and high interest rates remained key economic concerns.
And several U.S. states have been experiencing budget challenges in recent months, including California, New York and Pennsylvania, according to a recent report published by The Pew Charitable Trusts.
Burdened by $55B budget?
Also putting pressure on New Jersey’s budget was a big increase in annual spending authorized last year by Gov. Phil Murphy and fellow Democrats who control both houses of the Legislature. That pushed the size of the annual budget up to a record-high, nearly $55 billion.
There’s still plenty of time to make up ground, but any revenue shortfalls that remain by June 30 would have to be made up for by drawing down reserves or making other budget adjustments since New Jersey’s Constitution generally prohibits the state from operating with a deficit.
Updated revenue forecasts and revised spending projections for the current fiscal-year budget are expected to be released by late February when Murphy delivers his annual budget message to the Legislature, but “slight growth” is still expected during the second half of the fiscal year, Treasury officials said Wednesday.
Also putting pressure on New Jersey’s budget was a big increase in annual spending authorized last year by Gov. Phil Murphy and fellow Democrats who control both houses of the Legislature.
Overall revenues would have to grow 1.5% higher than the certified amount for the 2023 fiscal year, which ended June 30, 2023, to keep the current fiscal-year budget on track over the final six months.
For the 2024 fiscal year, which began July 1, 2023, total collections were running slightly above $18 billion through the end of December after hitting nearly $18.7 billion over the same period last year, according to Treasury.
Total collections in the month of December fell about 3% short of last year’s total for the same month.
In the first five months of this fiscal year, collections were off the previous year’s pace by $385 million. At the end of December, that grew $529 million.
Income tax collections running behind
This year, the income tax was running about 6% behind the last fiscal year’s totals through the end of December. The income tax is the largest single source of revenue for the annual budget, with proceeds constitutionally dedicated to funding items that include direct property-tax relief and K-12 public-school aid.
For the month of December, income-tax collections were off about 1.5% compared to the same month in the last fiscal year, with moderate growth in employer withholdings offset by declines in estimated and final payments, as well as higher tax refunds, Treasury officials said.
Collections for the corporation-business tax, or CBT, which is another major source of revenue for the annual budget, were down about $123 million, or roughly 5%, year over year through the end of December.
A nearly 17% drop in CBT collections was measured for the month of December, driven by higher refunds and lower final payments and partnership payments, among other factors, Treasury officials said.
The corporation-business tax is not forecast to see a major rebound over the second half of the fiscal year; by law, a special surcharge that had been levied on the profits of New Jersey’s top-earning businesses for the last several years was allowed to expire on Dec. 31.
Meanwhile, sales tax revenue through the end of December was running effectively flat compared to the same period in the last fiscal year, with collections totaling about $5.35 billion over the first six months of the current fiscal year.
The state reports sales-tax revenue with a one-month lag, so the latest figures represent economic activity through the end of November.
Among other tax sources, receipts from the state’s pass-through business alternative income tax, or PT-BAIT, were up by more than 9% year over year through the end of December, while realty-transfer tax collections were off by 24% year over year, according to Treasury.
Collections from the alcoholic beverage excise and tobacco products wholesale taxes were both up year over year, by 4.4% and 2.7%, respectively.
