TRENTON, N.J. (AP) -- New Jersey lawmakers received a sobering update of the state's finances Wednesday — with revenues growing at half the anticipated rate and the state's economy projected to lag the nation's well into next year.
The shortfall has Democrats questioning the "Jersey Comeback" Gov. Chris Christie has been touting and the viability of the 10 percent income tax cut he has proposed.
Christie wants to close the current year's budget gap by borrowing against the state's transportation capital fund, reducing salary increases and spending less in other areas. His budget still contains $183 million to fund the first portion of a personal income tax cut that will cost $1.4 billion when fully phased in four years from now, however.
"In our view, investing in a modest across-the-board income tax cut that will improve New Jersey's long-term economic competitiveness is and ought to be a top policy priority for New Jersey," Treasurer Andrew Eristoff told the Assembly Budget Committee.
Christie also did not waver from the tax cut that is part of his $32 billion budget for the fiscal year that starts July 1, promoting it during a transportation forum in Trenton.
But Assemblyman Vincent Prieto, chairman of the budget panel, said the state isn't in a position to offer a tax break that disproportionately benefits the wealthy, as Christie's would, since they pay the most in personal income taxes. Prieto left open the possibility of a state budget being passed without a tax cut.
Assemblyman Gary Schaer said borrowing money for transportation needs while funding a tax cut is like "going to your bank and borrowing money to deposit into your checking account that you must later repay with interest."
New Jersey is now projected to take in $676 million less than forecast through July 2013, according to the administration's revised revenue calculation. The Legislature's budget expert, David Rosen, now anticipates the shortfall at $1.3 billion over the same period.
Eristoff and Rosen, who presented their revised budget forecasts in separate sessions to the panel, both said New Jersey's revenue was growing, but at a slower pace than expected. Rosen said the state has realized half of the $1 billion in increased revenue that was forecast for this fiscal year, with no way to make up the shortage with just five weeks remaining.
Though the two revenue estimates are only one percentage point apart, Christie said the Office of Legislative Services' projection is not to be believed. He lambasted Rosen as a partisan operative who is catering to Democrats' agenda.
"This year, you have a large number of Democrats who do not want to cut taxes for anybody in New Jersey for any reason," Christie said. "There is more than enough room to cut taxes for the people of this state."
OLS is nonpartisan, providing research and other services to legislators of both parties. Rosen said projections from both OLS and the administration are usually slightly off-target.
The Senate and Assembly have offered their own tax cut plans, though they focus tax relief on the middle-class and poor. The Senate plan would cut income taxes by 10 percent over four years, based on earned income up to $250,000 and property taxes paid up to $10,000. The Assembly's plan offers a 20 percent credit to those earning up to $250,000 on the first $10,000 in property taxes paid — 25 percent for seniors and the disabled — funded partially by reinstating a surcharge on millionaires, which Christie previously vetoed.
Democrats who control the Legislature have five weeks to strike a deal with Christie on a balanced budget. The state constitution requires that the budget remain in balance; therefore, news of lagging tax collections must be met with corresponding cuts in spending.
Moody's Investors Service this week predicted that the state's economic recovery would remain muted through next year and would lag that national fiscal picture.
Despite that, the budget now relies on revenue growth of 8.6 percent from all sources, more than double the national average.
"We think at this point there is no reason for us to take an aggressively dark view of expectations," Eristoff said.
Associated Press reporter Geoff Mulvihill in Trenton contributed to this story.