New Jersey state budget (2012-2013)

Note: This article was last updated in 2013. Click here for more recent information on state budgets and finances.

Governor Chris Christie signed the $31 billion FY 2013 budget into law on June 29, 2012, after vetoing $361 million in spending proposed by the New Jersey State Legislature. The governor's vetoes included tax credits for the working poor and technology grants for private schools. The governor had sought a 10 percent income-tax cut across all brackets but the legislature did not pass it. The governor then called the legislature back to the capitol for a special session.

Christie said that his administration anticipated a $407 million shortfall by the end of FY 2013, ending in June. In his budget address in February 2013, he proposed to largely close that gap by delaying payments of property tax rebates to senior citizens and those earning less than $75,000 from May until August.

Legislative proposals

Senate President Stephen Sweeney proposed a tax credit equal to 10 percent of a resident’s property tax bill, capped at $1,000. The Assembly proposed the implementation of a "millionaires tax" to help boost the credit to 20 percent and cap it at $2,000.

Governor's proposed budget

Gov. Christie proposed his $32.1 billion state budget on February 21, 2012. The governor's proposed budget can be found here and the full text of his budget address can be found here. The proposed budget increased spending eight percent more than FY 2012.

Gov. Christie based his budget on his prediction that revenue would increase 7.3 percent in FY 2013. That prediction was seen as optimistic after the first 10 months of FY 2012 saw revenues drop. Standard & Poors said it was an “optimistic” economic-growth projection and called the budget structurally unbalanced.

Highlights of the proposed budget include:

• The state making a $1.1 billion pension payment
• Increasing school aid by $213 million
• Reducing aid to ailing cities

The proposed budget also included $183 million to fund the first half-year of the governor's 10 percent income tax cut and money to fund a five percent increase in the Earned Income Tax Credit for poor working families. The increase would boost the average benefit to $495 per family. During his State of the State address, Gov. Christie announced plans to reduce the state income tax by 10 percent, saying New Jersey could afford it because the state's finances improved over the last year. His administration said the cuts would be phased in over the next three years but did not explain how much taxes would go down year by year, or how it planned to deal with the revenue gap. New Jersey depended on the income tax for roughly one-third of its revenue.

Currently, top income tax rates in the region are:

• New Jersey: 8.9 percent
• New York: 8.82 percent
• Connecticut: 6.7 percent

Since 2003 the top marginal rate in New Jersey had risen to 8.9 percent from 6.25 percent.

The governor needed to introduce his income-tax cut as a bill separate from the budget. Democrats, who held a majority in both legislative houses, urged him to abandon the plan and instead focus on lowering local property levies, which were the nation’s highest at an average of $7,759 in 2011.

Budget challenges for FY 2013 include:

• $1 billion pension payment;
• $300 million debt service on the 1997 bond sale floated by former Governor Whitman

Revenue Estimates

The governor's budget was based on an assumption of a 7.2 percent revenue growth. Prior to the passage of the budget, Treasurer Andrew Sidamon-Eristoff, a Christie appointee, said that revenue through June 2013 may be $700 million less than Christie’s target. The legislature’s chief budget analyst said the gap may be almost twice that.