New Jersey has frozen nearly $1 billion in spending on property tax relief, lead abatement and a slew of other programs as it braces for “precipitous declines” in revenue amid the escalating coronavirus pandemic.
The largest program put on ice — valued at $142 million — is the popular Homestead Benefit credit, which was set to help thousands of elderly, disabled and low-income homeowners offset New Jersey’s notoriously steep property taxes.
The $921 million on the chopping block also includes $45 million for municipalities, $21 million in tuition assistance, $14 million to fight the opioid epidemic, $9 million for lead abatement and $5 million for another property tax-relief program known as the Senior Freeze.
State Treasurer Elizabeth Muoio disclosed the move in a letter to bondholders on Monday, noting that “the impact of COVID-19 on the State, its economy, and budget and finances is unpredictable and rapidly changing.”
In a fiscal year in which state tax collections through February were surging, up more than 6% from the same period last year, New Jersey now faces massive hits to all its largest revenue streams.
Revenue from income, business and sales taxes are all likely to get pummeled due to mandated business closures, Muoio wrote. Gov. Phil Murphy’s “stay-at-home” order will decrease motor fuels taxes. Casinos, which pay hefty taxes, are closed, and state lottery sales have already started to decline, she said.
The cash-flow issues impact the current fiscal year, which ends June 30, and the coming one, for which Murphy in February proposed a $40.9 billion budget.
Lawmakers just started the months-long process of negotiating the coming budget and will now have to radically rethink their approach.
New Jersey entered the current fiscal year with $1.3 billion in surplus funds. In recent days, Murphy has also joined with the governors of Pennsylvania, New York and Connecticut in calling for at least $100 billion in cash assistance from the federal government.
Unlike the federal government, New Jersey is barred from operating at a deficit by its state constitution. That effectively forces spending cuts in the event of unanticipated financial downturns.