Clearly, the recession is taking a tremendous toll on state and local finances. In New Jersey, where the constitution requires a balanced budget by July 1, the state has lost $6 billion in revenue from income, sales, corporate and other taxes the past two years, according to the nonpartisan Office of Legislative Services. In each of the past three fiscal years, the state budget has declined in its actual dollar amount, from $33.5 billion to $32.9 billion in 2009; to $29.8 billion in 2010; to the proposed $28.3 billion in 2011. Treasury Department records show that a decline in state spending from one year to the next is unprecedented in the modern history of New Jersey, let alone three smaller budgets in succession.
There are “winners” in this budget: corporations and the wealthiest individuals whose tax obligations will be lower this year. Those who stand to lose the most are disproportionately poorer, older and at greater risk of economic catastrophe than the rest of New Jersey. The sacrifice that the governor demanded in his budget address appears to fall almost entirely on middle and working class families, the disabled and seniors.
As part of the Better Choices for New Jersey coalition, NJPP has identified $1.6 billion in additional revenue and savings that would allow the state to avoid the worst of these cuts:
- Restoring the marginal tax rate increase on those making over $400,000 a year would generate about $1 billion in revenue.
- Increasing the motor vehicle registration fees on gas guzzlers could bring in $140 million.
- Retaining the surcharge on corporate business tax liabilities and increasing it to eight percent instead of four percent would provide $160 million in revenue.
- Closing corporate loopholes and instituting a system of combined reporting for businesses could save New Jersey taxpayers close to $250 million.
Without any additional revenue or savings, the FY2011 budget will be a blow to middle- and lower-income taxpayers and will devastate the programs that have for so long served as a safety net for the state’s most vulnerable residents. In addition, the reduction of $1.3 billion in state aid to public schools and municipalities means that local governments will have to lay off teachers, police and firefighters – something that affects us all.
Following is a look at some, but not all, of what is being sacrificed in the governor’s proposal.
A cut of $832 million in state aid to public schools proposed for the FY2011 budget is in addition to nearly $400 million in cuts ordered in the last half of FY2010. The reductions have resulted in widespread layoffs of teachers and staff, as well as inevitable increases in property tax levies, largely because the $1.2 billion in cuts represents 10 percent of the $12.5 billion total statewide property tax collections levy in New Jersey.
But cuts to public schools go deeper, hitting working families who depend on state assistance for after school care and children from low-income families who often rely on meals at school for life sustaining nourishment. Among the proposals:
Eliminating all $3 million in state funding for the school breakfast program and cutting $2.4 million in state funding for the school lunch program. The U.S. Department of Agriculture (USDA) reimbursements will continue, but cutting the state subsidy for meals provided by school districts will likely raise the meal prices charged to kids, reduce the quality of meals served or create a deficit in the food service program. If food services are provided by a private company and the costs of meals are fixed by contract, fewer children will probably be fed.
Eliminating all $10.5 million in state funding for NJ After 3, a successful public/private partnership that works with local non-profit agencies who collectively operate 115 programs – in local Ys, Boys and Girls Clubs, Jewish Family Services, and other organizations – to provide safe, high-quality affordable after school programs in 29 towns for approximately 12,000 students.
Since its inception in 2004, this program has raised approximately $45 million in private financial support. With no state funding, it will fall on these investors to make up the state’s share.
Public colleges and universities would lose $173 million in state aid in FY2011, causing tuition to rise and driving the best and brightest students out of state after high school. The budget continues a downward spiral. State support as a share of college budgets has declined precipitously – from an average across all of the colleges and universities of 48 percent in 1990 to less than 14 percent in the FY2011 budget proposal.
Direct state aid is only part of the story, however. The Office of Legislative Services’ Higher Educational Services report estimates that available resources will be nearly 14 percent less than current year spending for college students and universities. Of the more than 30 detailed changes included in the OLS analysis, only one was an increased appropriation.
That increase was a $1.5 million bump to $20.1 million to continue the state’s obligation to fund the ongoing New Jersey Student Tuition Assistance Reward Scholarship (NJSTARS) until it is phased out with the high school class that graduates in 2011. The program covers tuition and fees at the state’s 19 community colleges for any student who graduates in the top 15 percent of their high school class. The current budget is expected to support 2,100 students in college now, but incoming freshman students to county colleges, who do not already have a scholarship lined up, are out of luck.
The state’s other major financial aid program, Tuition Aid Grants (TAG), would see a cut of $10.9 million in FY 2011. Currently, one in three full-time New Jersey college students receives a TAG grant. The budget estimates that TAG appropriations will support 63,735 students in academic year 2010-2011, 924 more than in 2009-2010. It will support more students, in part, because awards to students at private colleges would be much smaller due to a reduction in the maximum size of these awards.
In a state where one in ten commuters uses public transit to get to and from work, the administration cut $300 million in funding to NJTransit. In response, the agency was forced to cut service on some lines and to raise fares by an average of 22 percent – the second highest fare increase in history. A daily roundtrip between New Brunswick and Trenton will increase to $17 from the current fare of $11.75. As a result, NJTransit expects to lose five percent of its ridership, many of whom will choose to drive instead. The increases hit especially hard for low-income families who have no other transportation alternatives.
New Jersey’s failing transportation infrastructure will continue to crumble, too, because the administration is cutting $56.3 million from the Department of Transportation, one of the largest cuts in the agency’s history.
At the same time, Gov. Christie has steadfastly refused to consider a gas tax increase to pay for transit and transportation needs, saying it will harm the economy. Gas prices in New Jersey are low relative to most places in the country, largely because New Jersey has the nation’s third lowest gas tax.
Earned Income Tax Credit
Nearly half a million low-income households face what amounts to a tax increase as a result of Gov. Christie’s plan to reduce by 20 percent the state Earned Income Tax Credit.
The EITC is a federal and state program that helps low-wage working families make ends meet by rewarding work over welfare. State EITCs are calculated as a percent of the federal credit and are deducted from taxes owed. In New Jersey, 485,000 working families with children receive this credit. A parent raising two children and working in a full-time, minimum wage job ($15,000 a year) would see a reduction in the family’s state tax credit by about $300. The total loss to struggling households from this policy recommendation is a staggering $45 million.
The proposal may be penny wise and pound foolish, too, because of the impact of those cuts on the amount of federal funds New Jersey receives to support low-wage workers.
The U.S. House of Representatives has passed legislation that includes the extension of TANF Emergency Contingency funds. If this legislation becomes law, New Jersey could receive up to $120 million in new federal funds in FY 2011. But if the state EITC appropriation is cut in this year’s budget, the state could lose money because the amount the federal government gives the state is based on how much the state has increased funding for benefits to low-income families since 2007.
Federal and matching programs
Outside the $28.3 billion budget proposal, the state likely will have about $12.5 billion available in federal funds for state programs in FY2011. The state has also budgeted for $1 billion in supplementary funds from the American Recovery and Reinvestment Act (about half the amount the state received last year).
Many believe the federal government determines how federal funds are spent. The reality is that the state often has considerable discretion in the amount of federal funds received by the state, as well as how those funds are used. In many case, the state’s proposed cuts to state funding of federal-state programs are magnified two, three or even nine times by the loss of federal funds.
- More than 40,000 women in New Jersey will lose critical health services and education because state funding for family planning is eliminated in this budget. That $7 million loss is multiplied by the federal government’s 9-to-1 match, leaving low-income women without a dependable source for the basic health care they received through Planned Parenthood. The money is used to provide annual check-ups and other health care for women, but not abortions because federal law prohibits federal funds from being used for abortions.
- The governor proposes to save $27 million by eliminating the monthly cash assistance of $140 to about 35,000 unemployed individuals, even though the federal government is making $90 million available in new federal funds to reduce the state cost for medical assistance to individuals . Instead of supporting some of the neediest residents of the state, the governor proposes to redirect those funds to balance the budget.
- A $13.5 million cut to the state Rental Assistance Program means low-income tenants will lose access to vouchers that help them pay for food, rent and clothing.
- A $39.6 million cut in cash grants through the Work First New Jersey General Assistance Program are likely to increase homelessness and hunger in the state.
- Eliminating a program that provides orthodontic services to the poorest children in the state will save $4 million but costs the state $8 million because of a 1-to-1 match in federal funding.
- People with disabilities and seniors will lose care that keeps them out of state institutions because of a proposed cut of $14 million in state funding of the Personal Care Assistance Program. Because the program receives $22 million in federal matching funds, the total reductions amount to $36 million less to pay for personal assistance to seniors and people with developmental disabilities.
- Spouses of people with disabilities will lose $200 monthly payments that paid for care of their loved ones because the state proposes cutting the SSI caregiver supplement by $6.7 million.
- A proposed $9.7 million cut to Legal Services of New Jersey means 11,000 New Jerseyans will lose access to legal services that assist with foreclosure, eviction, or situations of domestic violence.
Perhaps the most stunning example of the administration’s disregard for the value-added in federal funding of social programs is its handling of New Jersey’s successful FamilyCare program- a state-federal program that provides access to health insurance for low-paid working families that don’t have coverage through their jobs and can’t afford the cost of private insurance.
The state proposes to save $24.6 million in state funds by closing enrollment in the program to parents in those families with incomes of more than $23,352 a year (133 percent of the federal poverty level), even though doing so will also cost the state $48 million in federal funds. Some 39,000 parents will be denied coverage. The total loss amounts to more than $70 million. .
The cut comes on the heels of an Executive Order by Gov. Christie that denied FamilyCare coverage to 11,700 legal immigrants who have been in the U.S. less than five years. The proposed budget also ends all state funding for FamilyCare outreach, making it impossible for the state to meet its goal of insuring all children by 2013. It will also result in the further loss of federal funds.