New Jersey Treasurer Aaron Binder told legislators on Tuesday that state tax revenues were 0.6% above target last month but cautioned that the state faced “national and international headwinds” that would impact tax collections in the new fiscal year that starts July 1.
In testimony before the Senate Budget & Appropriations Committee, Binder said the Treasury Department now forecasts tax collections of $57.8 billion, an increase of $337 million, for the current fiscal year that ends June 30. Based on these trends, Treasury has updated its FY 2027 revenue forecast by $163 million to $59.2 billion, an increase of 0.3%, he said.
“The outlook for this year is good, and the outlook for next year is cautious in the face of ongoing uncertainties,” Binder said.
“These additional revenues make a small dent in the FY 2027 structural (budget) gap and moderately boost the state’s undesignated fund balance,” Binder said. “The structural gap for FY 2027 is now estimated at less than $1.5 billion, and this administration is committed to further reducing the gap next year.”
NJBIA Chief Government Affairs Officer Christopher Emigholz said afterward that it was “good news that revenues are on target and even better news that they are slightly higher.”
“Hopefully, this means it is easier to come to an agreement on a state budget that maintains Gov. Mikie Sherrill’s proposed investments into her ‘Saving Time & Money Agenda,’ holds the line on spending as proposed, and lessens the business impact of the proposed tax increases,” Emighloz said.
The state surplus is now projected at almost $6.0 billion for the end of FY 2027, which represents 9.8% of appropriations, Binder said, calling that a “prudent” amount. He pointed to Moody’s most recent stress test for states’ fiscal health that estimated a moderate recession would create a 9.5% budget hole in New Jersey’s budget.
“Our current surplus provides just enough cover for only one fiscal year under that moderate scenario,” Binder said.
Binder also answered questions about the status of three new tax proposals totaling $750 million that the administration has made that will affect businesses in the new budget: a temporary $1 million cap on net operating loss deductions under the corporation business tax; the elimination of the alternative business calculation (commonly called the ABC deduction) for pass-through businesses; and a new Medicaid assessment on businesses that with 50 or more employees that use Medicaid instead of an employer-sponsored health plan.
Binder said the bills were still in the process of being drafted by the administration and would be submitted to the Legislature soon.
Senator Paul Sarlo, the chairman of the committee, noted that Maryland had enacted a tax on employers whose employees use Medicaid, “The Fair Share Health Care Fund Act,” but it was ultimately struck down in federal court and never took effect.
Do we have a potential loss of revenue ($145 million) if one of the companies impacted in New Jersey uses the Maryland precedent and takes us to court?” Sarlo asked.
“We’ll have to look to see just how similar it is to our proposal and see where we may need to make changes to our proposal,” Binder replied.
