Credit: (Arek Socha/Pixabay)

New Jersey state tax receipts were boosted by a strong holiday shopping season, according to the state Department of the Treasury, but overall collections remain slightly off the previous fiscal year’s pace as Gov. Phil Murphy prepares to deliver his next budget.

The latest revenue figures released Wednesday by Treasury indicate sales-tax collections grew last month by 3% compared to the same month last year, marking the strongest rate of growth in sales-tax collections in nearly a year.

The January revenue report is closely watched since the state reports sales-tax revenue with a one-month lag, and the latest figures reflect economic activity that occurred in December’s critical holiday shopping season, meaning the 2023 holiday shopping season produced more revenue for the state than the previous year’s.

However, even with these results, the state’s overall revenue performance so far this fiscal year remains down.

John Reitmeyer discusses NJ’s revenue trends

State tax collections through the first seven months of the current fiscal year, which began July 1, were off the previous fiscal year’s pace by nearly $330 million, according to Treasury. Moreover, major sources of revenue like the income and corporation business taxes are among those lagging. Murphy, a second-term Democrat, is due to present a new state budget to lawmakers on Feb. 27;  his budget message will come at a time when inflation and high interest rates remain among a number of key economic concerns.

Budget gaps ahead?

It will also come on the heels of warnings issued earlier this week by an  independent group” of fiscal-policy experts whose economic projections suggest a series of multibillion-dollar budget gaps loom in the longer term for New Jersey under the state’s existing tax and spending trends.

Despite softening revenue forecasts, a big increase in annual spending authorized last year by Murphy and fellow Democrats who control the Legislature pushed the size of the annual budget to a record-high, nearly $55 billion.

To be sure, there’s still plenty of time to make up ground for the current fiscal-year budget, including with crucial April income-tax collections still pending. 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.

In all, state tax collections across all major sources of revenue were running slightly over $23 billion through the end of January, according to Treasury.

Falling short

Despite the uptick in sales-tax revenue, the total collections recorded thus far this fiscal year fell short of the $23.58 billion that was collected over the first seven months of the 2023 fiscal year.

The income tax was running about 3.5% behind the last fiscal year’s totals through the end of January. 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.

‘Online gambling continues to grow year-over-year with January collections from internet gaming registering $4.3 million, or 19.0 percent higher than a year ago.’ — Treasury officials

Collections for the corporation-business tax, or CBT, which is another major source of revenue for the annual budget, were down about $140 million, or 5.3%, year over year through the end of January.

In addition to sales-tax collections, which were running slightly ahead of last year’s pace through the end of January, casino tax revenues, bolstered by online gambling receipts, were also performing better over the first seven months of the 2024 fiscal year compared to the same period in the previous fiscal year, according to Treasury.

“Online gambling continues to grow year-over-year with January collections from internet gaming registering $4.3 million, or 19.0 percent higher than a year ago,” Treasury officials said.

Among other notable tax sources, receipts from the state’s pass-through business alternative income tax, or PT-BAIT, were up by more than 11% year over year through the end of January, while realty-transfer tax collections were off by 25% year over year, according to Treasury.

In addition to the governor’s budget message, updated revenue forecasts and revised spending projections for the current fiscal-year budget are scheduled to be released by Treasury on Feb. 27.