New Jersey State lawmakers are moving through the Senate a bill aimed at making state revenue forecasts more reliable and accurate.
The legislation (S1530), which the Senate Budget and Appropriations Committee approved Nov. 8, comes a year after the state borrowed $4 billion in bonds based on revenue forecasts that ultimately proved inaccurate when the state months later posted a $10.1 billion surplus.
The measure would establish a five-member, joint legislative and executive branch New Jersey Revenue Advisory Board to provide consensus revenue forecasting.
“Accurate revenue forecasts are vital to the budget process,” said Senate Republican Budget Officer Steven Oroho (R-24) in a press statement. “Policymakers depend on the forecasts, and more dependable projections will help minimize unanticipated budgetary problems. With the creation of the Revenue Advisory Board, New Jersey’s finances will be more predictable and manageable.”
Oroho is a primary sponsor of the legislation along with Senate Budget and Appropriations Committee Chairman Paul Sarlo (D-36). The panel approved the bill unanimously. Oroho said board members would include the state treasurer, the legislative budget and finance officer, and an independent third member with budgeting experience.
Currently, Oroho said the Division of Revenue and Economic Analysis and the Office of Legislative Services provide revenue forecasts. “The often-inconsistent numbers are used to assist with budget preparation and adoption. Ultimately, the Governor has the responsibility of certifying the official revenue forecast used for the budget,” Oroho added.
“Collaboration will ensure that neither the executive or legislative branch has too much influence over the numbers, and prevent overly optimistic projections from impacting budget integrity,” Oroho said. He described the bill’s movement as “a significant step to more responsible stewardship of New Jersey taxpayers’ money.”
Bill Gets Nod from New Jersey Business Group
The New Jersey Business & Industry Association (NJBIA) Nov. 12 lent its support to Oroho and Sarlo’s bill. The group said that a year ago New Jersey “unnecessarily borrowed more than $4 billion in non-callable bonds” based on the Murphy administration’s revenue projections only to find eight months later that the state was looking at a $10.1 billion surplus.
“This bill will bring some much-needed transparency to the revenue-projecting process, while also bringing less volatility to budget forecasting,” said NJBIA Vice President Christopher Emigholz, who testified on the bill before the committee approved the measure.
“Think about it like being prepared for the twists and turns of a roller coaster. You can better plan for the downs and take better advantage of the ups. We think this is a good bill and a good way to better avoid any fiscal misrepresentation.”
The group noted that New Jersey’s governor would still retain the authority to certify revenues for the state budget under the legislation, but the board would include input from outside experts, members of the public, the state treasurer, and the top budget official from the nonpartisan Office of Legislative Services.
There would also be appointments for the executive branch and the majority and minority parties of the Legislature. Further, the advisory board would be required to hold public hearings during the revenue forecasting process, NJBIA said.
“Inaccurate revenue projections for our state budget are not new to this past year, nor are they partisan,” Emigholz said. “But this bill will help make it a better process going forward for all current and future governors and legislators.”
De-Politicizing the Budget
Additionally, the legislation got a thumbs up from New Jersey Policy Perspective, a nonpartisan think tank that works on economic and social policy issues. The group said Nov. 8 that consensus revenue forecasting is “a budgeting best practice long-recommended by good-governance advocates and budget policy experts.”
Sheila Reynertson, a senior policy analyst with New Jersey Policy Perspective, said that the bill’s enactment “would de-politicize the budget-making process, help boost public trust in state government, and improve the state’s standing with credit rating agencies.
“While this policy change may sound technical and benign, having the legislative and executive branches base their budget proposals on an agreed-upon revenue estimate will help limit budget gimmicks and redirect attention to more important debates about which programs to prioritize,” Reynertson said.
She said reforms in the bill “would break the cycle of politically easy maneuvers that have plagued New Jersey’s finances and allow everyone — lawmakers and the public alike — to better understand the consequences of tax and budget policy decisions.”
Tax Cut Bill for Businesses
The Senate Budget and Appropriations Committee cleared an additional bill (S4068) by Oroho and Sarlo Nov. 8 that Oroho said would result in lower federal taxes for New Jersey corporations.
Oroho said the bill would amend the way business alternative income tax can be calculated in a manner that would reduce federal tax liabilities.
“We can help corporations cut their tax bill to the feds without reducing tax revenue to the state,” said Oroho in a press statement.
This bill, which the committee approved unanimously, revises the way the optional/elective pass-through business alternative income tax is calculated.