NJ Treasury freezes almost a billion dollars in spending as fiscal uncertainty over COVID-19 crisis grows
The New Jersey treasury has frozen almost a billion dollars in state spending as concerns about the fiscal impact of the COVID-19 crisis increase.
State officials released a voluntary financial disclosure statement Monday regarding New Jersey’s potential financial picture in the wake of the pandemic. The notice to bondholders is required by law.
“The impact of COVID-19 on the state, its economy, and budget and finances is unpredictable and rapidly changing, but the state believes that events surrounding COVID-19 will negatively impact the state’s economy and financial condition,” reads the statement issued by New Jersey Treasurer Elizabeth Maher Muoio.
The crisis will affect revenue collections and pension fund contributions,
State officials expect “precipitous” declines in revenue for fiscal years 2020 and 2021. Significant reductions in revenue are expected for gross income tax revenues, corporate business tax revenues, and sales tax revenues due to required business shutdowns, a decline in gas taxes, a steep decline in casino-related taxes due to casino closures, and the drop in lottery ticket sales.
State officials expect that they will need to significantly revise the estimated revenues and projected appropriations for fiscal years 2020 and 2021. The state also expects to face issues covering its short-term obligations due to the expected extension of the state tax filing deadline from April 15 until July.
The director of the New Jersey Office of Management and Budget on Friday placed more than $900 million in appropriations into reserve in order to ensure sufficient cash and budget authority to meet emergency and statutorily required obligations.
Among the major items of appropriations placed in reserve is funding for the New Jersey Homestead Benefit credit. State officials are in the process of notifying towns that any credits intended to be applied to May 1 bills can no longer currently be supported by the state. The state is prepared to reimburse municipalities for the administrative costs if they have to issue revised property tax statements.
“It is likely that the full fiscal impact of COVID-19 on the state will change significantly as the situation further develops. The actual impact of COVID-19 on the state, its economy and its budget and finances will heavily depend on future events, including future events outside of the control of the state, and actions by the federal government as well as nations across the world,” reads the statement. “The state believes that it may be some time before the state is able to determine the full impact that the various events surrounding COVID-19 have on the state’s economy, and its financial condition.”
You can read the full disclosure statement online.
The full list of appropriation items that have been placed in reserve spending freeze: