May 18, 2016 / 8:55 PM / 4 years ago

New Jersey officials propose cuts to close $843 mln revenue gap

NEW YORK, May 18 (Reuters) - New Jersey Governor Chris Christie’s administration on Wednesday said the state is facing a revenue shortfall of $843 million through fiscal 2017 and proposed reducing state hospital assistance for under-insured patients, among other measures.

“We could not maintain a reasonable fund balance without engaging in such difficult decision-making,” Acting State Treasurer Ford Scudder told state Assembly budget committee members. “These decisions were not made lightly.”

Lawmakers and Christie must finalize next year’s budget by June 30. The shortfall could be even higher, at just over $1 billion, according to forecasts from the legislature’s own budget officials.

Like several other U.S. states, New Jersey is expecting lower personal income tax collections this year, dampening overall revenue.

“The revenue declines have been largest in those states like ours with highly progressive tax systems, and smallest in states with flatter tax structures,” Scudder said.

For fiscal 2016, which ends on June 30, total revenue is now expected to be $33.198 billion.

Although that is $450 million higher than 2015 for major tax revenue, it is still $602.6 million, or about 1.8 percent, lower than Christie’s February budget plan for all revenue.

Estimated revenue for fiscal 2017 is now $34.591 billion, or nearly $241 million below the February forecast.

To save money, Christie wants to strip $25 million of state aid to hospitals for underinsured patients. The reduction is called for because more New Jerseyans are now insured, causing a big decline in uncompensated hospital care and an increase in Medicaid funds flowing into hospitals, Scudder testified.

Christie also wants to immediately collect the top marginal tax rate of 8.97 percent on all lottery winnings over $10,000, rather than the current 3 percent income tax withholding.

Scudder said the state should also should slow implementation of a program to convert old business grants the state still owes into tax credits.

Legislation enacted in January calls for those outstanding grants to be credited against corporate tax returns beginning in fiscal 2017.

Christie wants to begin by paying out only 5 percent of prior amounts owed, instead of the 30 percent called for under the new law.

“Now the state can’t even afford the anticipated first-year loss from the tax credits, and is looking at kicking the can even further down the road,” said Jon Whiten, deputy director of New Jersey Policy Perspective, a left-leaning think tank. (Reporting by Hilary Russ; mEditing by Steve Orlofsky)

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