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(Also attached to this Star Ledger article • BREAKING DOWN THE NUMBERS: Where does the money go?) "..The governor may freeze up to $400 million in payments to schools, higher education, hospitals, pension funds and municipalities, according to information tucked into a bond disclosure sent to Wall Street investors. The news has worried local leaders struggling with budget problems of their own.Christie, who takes office on Jan. 19, will work with the Corzine administration to freeze and cut spending..."
Gov. Corzine pledges 'answers' by Christmas for state's $1 billion budget hole
November 26, 2009, 7:13PM
Governor Corzine said today he would come up with "answers" about the state's larger-than-expected $1 billion budget deficit by Christmas.
Gov. Jon Corzine said today he will once again scour the state’s budget to fill another unexpected shortfall that reared its head this year.
The governor, who said he found out about the $1 billion budget gap after returning from a post-election vacation around Nov. 10, said his administration has come up with some options, but did not disclose specifics.
Wednesday’s revelation that sagging tax revenue and higher expenses widened the budget gap to five times larger than expected is the latest hurdle in an ongoing fiscal battle that has dogged Corzine.
• BREAKING DOWN THE NUMBERS: Where does the money go?
• N.J. GOV-ELECT CHRIS CHRISTIE: Time of transition
Pulling out the red pen to make cuts has become a familiar exercise for Corzine, who lost his reelection bid to Chris Christie earlier this month.
"We’ll have meetings, just like we would normally. We’ll come up with answers," the governor said. "Certainly before Christmas."
The governor may freeze up to $400 million in payments to schools, higher education, hospitals, pension funds and municipalities, according to information tucked into a bond disclosure sent to Wall Street investors. The news has worried local leaders struggling with budget problems of their own.
Christie, who takes office on Jan. 19, will work with the Corzine administration to freeze and cut spending, Christie spokeswoman Maria Comella said.
"All along we have expected that New Jersey’s fiscal situation was going to be much worse than originally anticipated," she said.
The state was already expected to begin next year’s budgeting process with an $8 billion hole.
Corzine said his administration has found almost $200 million in savings but is still trying to reduce spending by another $800 million.
"We’ll hold back spending. And then the new governor can figure out whether he wants to unfreeze that or freeze it," the governor said.
Corzine said the state may pay only a percentage of its pledged aid to municipalities.
"The ultimate decisions on what accounts are frozen are made by the governor," Treasury spokesman Tom Vincz said. "We also hope the transition team gives us more clarity on what accounts they believe should be frozen."
Corzine’s visit to the nonprofit Eva’s Village in Paterson today -- where he helped prepare Thanksgiving meals for the hungry -- illustrated the difficult decisions he faces as he tackles a budget that keeps bleeding revenue.
The governor has repeatedly promised to protect the state’s "most vulnerable," but aid to municipalities like Paterson could be on the chopping block in the coming weeks.
Paterson Mayor Jose Torres said the city supplements its approximately $200 million budget with $30 million in state aid. He said cutting municipal aid will inevitably hurt the city’s neediest.
"Any reduction in aid is going to exacerbate this economic tsunami," he said. "It’s a snowball."
Torres admitted, though, he doesn’t have answers to the budget dilemma.
"I don’t know," he said when asked for solutions. "It’s very, very tough."
Brick Mayor Steve Acropolis said municipalities are being forced to decide between raising taxes and cutting services.
"The governor said he wants everybody to live within their means, and then he cuts the aid to municipalities," he said. "That just takes the tax increase and puts it on the residents of the town."
To close the $1 billion gap, the state has to find places where it has pledged — but not yet delivered — money. For example, annual payments into the pension fund have historically been a favorite place to cut spending.
The newly disclosed budget crunch is the latest in a series of adjustments this year as the state deals with an unexpectedly deep recession. It’s the second year in a row the state has needed to make billion-dollar-plus mid-year spending cuts.
In October, the state said it had received $190 million less in taxes than expected. Two days after losing the election, Corzine ordered cabinet members to find $400 million in cuts by next Tuesday.
On Wednesday, the state revealed that October tax revenue was $222 million under projections. The state also said it started the current fiscal year with $244 million less than expected, and was facing $350 million in additional funding needs.
By Chris Megerian and Lisa Fleisher/Statehouse Bureau
Breaking down the numbers
New Jersey has to close an estimated $1 billion budget gap. Gov. Jon Corzine has already taken some steps but revealed yesterday he would seek up to $400 million in more cuts from schools, municipalities, hospitals and other sources.
COSTS
$412.7M revenue shortfall (including the $190M reported in October, plus a new $222M shortfall)
$350M additional spending “need”
$244M reduction in originally calculated opening fund balance
CUTS
$215M in savings already identified
$60M from Powerball revenue and recovered offshore bank account tax payments
$400M in spending cuts due Dec. 1 from state’s departments
Up to
$400M in cuts in school aid, municipal aid, higher education, hospitals and pension plan contributions
Where doesthe money go?
State aid and grants represent nearly three-quarters of the budget.
Legislative and judicial operations
$0.7 billion (3%)
Capital
$0.1 billion
Debt service*
$1.9 billion (7%)
State aid
$11.9 billion (41%)
Employee benefits, rent and utilities
$1.5 billion (5%)
TOTAL BUDGET:
$29 billion
Grants-in-aid
$9.4 billion (32%)
Executive operations
$3.5 billion (12%)
*Total debt service is $2.4 billion, school construction debt is reflected in state aid.
Sources: New Jersey state budget; disclosure sent to Wall Street investors for New Jersey building authority; 2009 Series B refunding bonds
THE STAR-LEDGER
