April 30 New Jersey Governor Chris Christie will have a tough time closing a projected $807 million revenue shortfall through the end of this fiscal year, Moody's Investors Service said on Wednesday.
With only two months left in the fiscal year, about 83 percent of the budget is already spent. The large shortfall is equal to 14.5 percent of the money the state has earmarked through June 30, Moody's senior analyst Baye Larsen said.
Christie could cut operations or expenditures or use some of the roughly $300 million expected to remain in the general fund. His administration could also tap into $435 million in funds outside the general fund, but the state would have to repay what they borrowed from those funds with fiscal 2014 resources, Larsen said.
One-time budget gimmicks have already landed the state in hot water with credit rating agencies. Standard & Poor's Ratings Services downgraded New Jersey to A+ earlier this month, citing revenue tricks, the state's sizable imbalance, "bullish" revenue assumptions and pressure from growing pension obligations.
Moody's rates New Jersey Aa3 with a negative outlook. While a shortfall was expected, the size of the gap was something of a surprise and will exert continued pressure on the state's credit standing. This marks the third consecutive year that revenues have fallen below estimates.
About $700 million, or 85 percent, of New Jersey's anticipated shortfall is due to lower-than-expected income tax collections, the state treasurer's office said on Monday.
The state's progressive tax system relies heavily on high-income taxpayers; many may have accelerated income into 2012 to sidestep pending increases in federal income taxes.
Full numbers for April collections, which are normally large because of the income tax filing deadline, were not yet available.
State Treasurer Andrew Sidamon-Eristoff will provide details of specific actions the state will take when he testifies on May 21 before lawmakers who are reviewing next year's budget. (Reporting by Hilary Russ; Editing by Prudence Crowther)