Budget Proposal: Governor Chris Christie Takes Important First Step to Fix Stat'e Fiscal Mess
Wednesday, 17 March 2010
FROM THE NJ STATE CHAMBER OF COMMERCE
Governor Chris Christie presented his fiscal 2011 state budget to members of the Legislature. The proposed $28.3 billion spending plan contains significant spending reductions to close an estimated $10.7 billion shortfall for the new fiscal year that begins July 1. The Governor also proposed changes to public employees' and teachers' pensions and benefits, as well as a spending cap to help control property taxes.
"Governor Christie made tough choices and presented a budget containing proposals requiring immediate sacrifice for most New Jerseyans," said New Jersey Chamber Chairman Dennis Bone, President, Verizon New Jersey. "We recognize that he had few options considering our enormous deficit. The Administration should be applauded for tackling long-term systemic issues that, if addressed, will lead to job creation, economic growth and fiscal stability for the state. Unfortunately, fixing New Jersey's finances is a marathon and not a sprint."
The proposal does not disproportionately burden the employer community, which is struggling to emerge from the worst economic downturn in decades. Presenting a budget that does not include new or increased taxes sends the right message to New Jersey's business community.
"The Governor came into office promising the economy would be his number one priority - and that has been the case," said Bone. "It is a positive sign that the Governor and Legislature are working together to ensure New Jersey is a premier destination for employers in all industries seeking highly-skilled and trained workers, an unprecedented location, a first-class infrastructure system and a superior quality of life. Although the short-term fiscal outlook is challenging, the proposals contained in this budget will eventually lead to New Jersey's brighter future."
Below are details of the proposed budget's impact on employers and the economy:
- The 4 percent surtax on the Corporation Business Tax (CBT) will expire at the end of the fiscal year. The surcharge added 4 percent to a company's corporate tax liability. The tax increase was originally to expire in fiscal 2009.
- The proposed budget does not renew the income tax rate increase enacted last year on those who make over $400,000. This increase, which expired Dec. 31, 2009, was seen as a small-business tax increase since S-corporations, LLCs and partnerships are taxed as personal income.
- Businesses in Urban Enterprise Zones will continue to receive the benefit of collecting only half the state sales tax - 3.5 percent - from customers, but towns with UEZs no longer receive payment from the state.
- The InvestNJ program will be eliminated. The year-old program provided grants to companies that hired new workers and offered tax breaks to companies that made capital investments.
- The Business Employment Incentive Program (BEIP) is funded at the 2010 level. It provides grants for companies that either create at least 25 new jobs within a two-year period - or high-technology and biotech firms that create 10 new jobs.
- Tourism promotion will be funded at the 2010 level.
- Certain government functions will be privatized.
Of general interest:
- The Governor called for a constitutional amendment that imposes a 2.5 percent cap on property tax increases. All public employee compensation packages would be subject to the 2.5 percent cap. Municipalities would only be able to exceed the cap by referendum.
- The Governor proposed another constitutional mandate limiting increases of state spending on direct services to 2.5 percent each year. He called for the proposed amendments to appear on the November ballot.
- He pledged to provide towns and school districts tools to deal with cuts in state aid, including enabling changes to collective bargaining for police, fire and teacher contracts, public pensions and benefits, and the civil service system.
- There is a reduction in state aid to school districts of just under 5 percent - a reduction of $820 million.
- A reduction of $446 million in county and municipal aid.
- The plan converts property tax rebate checks to direct tax credits, and suspends the program for one year, with credits for eligible citizens resuming in May 2011. A $3 billion payment to the state pension system will not be made.
The Legislature must pass and the Governor must sign a budget bill by July 1. The members of the Legislature and the Governor will now spend the coming months crafting a final product.
"The employer community will continue to offer economic recommendations over the coming months as the Governor and members of the Legislature collaborate on a final budget bill that is in the best interest of the state and its residents," said Bone. "The Governor's priorities are to reduce excessive government spending, lower taxes, create private-sector jobs and shrink government. That's what employers have been seeking for quite some time because this will force us to finally live within our means - and make the state more competitive."
Chamber staff will continue to monitor the budget process and we will be asking for your input on this important matter. If you have any questions, please contact Chamber Lobbyist Mary Ellen Peppard at (609) 989-7888.