DEPARTMENT OF THE TREASURY .us

ANALYSIS OF THE NEW JERSEY BUDGET

DEPARTMENT OF THE TREASURY

FISCAL YEAR

2015 - 2016

PREPARED BY OFFICE OF LEGISLATIVE SERVICES NEW JERSEY LEGISLATURE ? MAY 2015

NEW JERSEY STATE LEGISLATURE

SENATE BUDGET AND APPROPRIATIONS COMMITTEE

Paul A. Sarlo (D), 36th District (Parts of Bergen and Passaic), Chair Brian P. Stack (D), 33rd District (Part of Hudson), Vice-Chair Peter J. Barnes III (D), 18th District (Part of Middlesex) Jennifer Beck (R), 11th District (Part of Monmouth) Anthony R. Bucco (R), 25th District (Parts of Morris and Somerset) Sandra B. Cunningham (D), 31st District (Part of Hudson) Linda R. Greenstein (D), 14th District (Parts of Mercer and Middlesex) Steven V. Oroho (R), 24th District (All of Sussex, and parts of Morris and Warren) Kevin J. O'Toole (R), 40th District (Parts of Bergen, Essex, Morris and Passaic) Nellie Pou (D), 35th District (Parts of Bergen and Passaic) M. Teresa Ruiz (D), 29th District (Part of Essex) Samuel D. Thompson (R), 12th District (Parts of Burlington, Middlesex, Monmouth and Ocean) Jeff Van Drew (D), 1st District (All of Cape May, and parts of Atlantic and Cumberland)

GENERAL ASSEMBLY BUDGET COMMITTEE

Gary S. Schaer (D), 36th District (Parts of Bergen and Passaic), Chair John J. Burzichelli (D), 3rd District (All of Salem, parts of Cumberland and Gloucester), Vice-Chair Christopher J. Brown (R), 8th District (Parts of Atlantic, Burlington and Camden) Anthony M. Bucco (R), 25th District (Parts of Morris and Somerset) Gordon M. Johnson (D), 37th District (Part of Bergen) John F. McKeon (D), 27th District (Parts of Essex and Morris) Raj Mukherji (D), 33rd District (Part of Hudson) Declan J. O'Scanlon, Jr. (R), 13th District (Part of Monmouth) Eliana Pintor Marin (D), 29th District (Part of Essex) Troy Singleton (D), 7th District (Part of Burlington) Jay Webber (R), 26th District (Parts of Essex, Morris and Passaic) Benjie E. Wimberly (D), 35th District (Parts of Bergen and Passaic)

OFFICE OF LEGISLATIVE SERVICES

David J. Rosen, Legislative Budget and Finance Officer Frank W. Haines III, Assistant Legislative Budget and Finance Officer

Marvin W. Jiggetts, Director, Central Staff David J. Rosen, Section Chief, Revenue, Finance and Appropriations Section

This report was prepared by the Revenue, Finance and Appropriations Section of the Office of Legislative Services under the direction of the Legislative Budget and Finance Officer. The primary author was Thomas Koenig. Matthew T. Szudajski authored the background paper entitled "Regional Trends in Business Entity Tax Homes."

Questions or comments may be directed to the OLS Revenue, Finance and Appropriations Section (609-847-3835) or the Legislative Budget and Finance Office (609-847-3105).

DEPARTMENT OF THE TREASURY

Budget Pages.......

C-6 to C-7; C-14 to C-15; C-22; C-23 to C-24; D-363 to D-415; E-6 to E-7; G-4 to G-8

Fiscal Summary ($000)

State Budgeted Federal Funds Other Grand Total

Expended FY 2014

$2,357,629

14,776

1,238,552

$3,610,957

Adjusted Appropriation

FY 2015 $2,074,427

8,862

1,260,580

$3,343,869

Recommended FY 2016

$2,086,181

7,519

1,269,608

$3,363,308

Percent Change 2015-16

0.6%

(15.2%)

0.7%

0.6%

Personnel Summary - Positions By Funding Source

State

Actual FY 2014

3,682

Revised FY 2015

3,682

Funded FY 2016

3,717

Percent Change 2015-16

1.0%

Federal

52

50

54

8.0%

Other

1,820

1,822

1,858

2.0%

Total Positions

5,554

5,554

5,629

1.4%

FY 2014 (as of December) and revised FY 2015 (as of January) personnel data reflect actual payroll counts. FY 2016 data reflect the number of positions funded.

To be consistent with the data display in the Governor's FY 2016 Budget, the above table includes the funding data in the Department of the Treasury for Higher Educational Services. Other explanatory data for these programs are included in a separate booklet entitled "Higher Educational Services."

Link to Website:

Department of the Treasury

Highlights

FY 2015-2016

PROPERTY TAX RELIEF: GRANTS-IN-AID AND STATE AID

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The Governor's FY 2016 Budget provides $1.92 billion for property tax relief in the

Department of the Treasury, which is $11.0 million, or 0.6 percent, below the FY 2015

adjusted appropriation. Grants-in-Aid, which finance direct property tax relief to

residents, account for $559.7 million of the total ($20.3 million, or 3.5 percent, less

than in FY 2015) and State Aid to local subdivisions of State government accounts for

the remaining $1.36 billion ($9.3 million, or 0.7 percent, more than in FY 2015). Table

1 on page 7 lists aggregated components of the recommended State Aid total.

?

The Administration recommends a $33.2 million funding decrease in FY 2016 for the

New Jersey Homestead Property Tax Credit program, renamed the Homestead Benefit

Program. The reduction is ascribable to the expected continuation of diminishing

enrollments. Specifically, an estimated 695,300 homeowners would collect an average

$480 benefit in FY 2016, after 771,700 homeowners obtained an average $470 rebate

in FY 2015. In FY 2010, some 992,000 homeowners had received a rebate.

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For FY 2016, the Administration recommends maintaining the FY 2015 parameters of

the Senior and Disabled Citizens' Property Tax Freeze program, or Homestead

Property Tax Reimbursement program. Specifically, the program would operate under

its statutory provisions except that the income eligibility threshold would be $70,000

for tax years 2013 and 2014 in lieu of the statutory $84,289 for tax year 2013 and

$85,553 for tax year 2014. Overall, the Executive forecasts a $1,278 average FY 2016

payment to 171,100 participants. In FY 2015, some 174,700 participants received an

average $1,178 payment. The projected higher average amount reflects rising property

tax liabilities offset, in part, by more recent cohorts of program participants with lower

average benefits replacing long-time participants with larger average benefits.

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The Governor's FY 2016 Budget proposes that municipalities receive $1.13 billion from

the off-budget Energy Tax Receipts Property Tax Relief Fund in FY 2016, a $16.7

million, or 1.5 percent, increase over FY 2015. Two funding sources comprise this

appropriation: $788.5 million from the Energy Tax Receipts Property Tax Relief Fund

proper and an amount not to exceed $341.9 million to be transferred to the fund from

the Consolidated Municipal Property Tax Relief Aid (CMPTRA) account pursuant to

budget language. The Administration also proposes that an additional $252.2 million in

CMPTRA be expended in FY 2016, thereby bringing total distributions from the State's

two formula-driven municipal aid programs to an unchanged $1.36 billion.

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The proposed FY 2016 appropriation to the public employee retirement funds equals

$1.30 billion, representing 3/10th of the actuarially recommended full $4.33 billion

State pension contribution, as projected based on July 1, 2013 actuarial valuation data.

The FY 2015 contribution was $680.6 million, or the actuarially determined employer's

share of the additional pension benefits earned by active employees in FY 2015 without

any amortization of the $3.25 billion in accrued unfunded liabilities. Of the

recommended $1.30 billion total, the Governor's FY 2016 Budget allocates $58.8

million to Treasury to make the State's required annual payment to the Police and

Firemen's Retirement System on behalf of local governmental entities.

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Department of the Treasury

Highlights (Cont'd)

FY 2015-2016

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The Administration recommends new language that would allow for the transfer of

unspecified amounts out of the Highlands Protection Fund ? Planning Grants account

to the Highlands Water Protection and Planning Council for the payment of expenses

related to the review and potential revision of the Highlands Regional Master Plan. The

language supersedes statutory law that dedicates Highlands Protection Fund balances

exclusively to four aid programs for municipalities in the Highlands planning area.

TREASURY OPERATIONS

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The Administration recommends a virtually unchanged $13.3 million FY 2016

appropriation to the New Jersey State Lottery. But the total does not include the

administrative expenses of Northstar New Jersey Lottery Group, LLC (some $29.3

million in FY 2014). The compensation of the contractor that has been running the

Lottery's sales and marketing operations since October 1, 2013 is instead deducted

directly from Lottery revenues before the balance is transferred to the General Fund for

the support of State institutions and State aid to education. The State Lottery's

administrative expenses totaled $35.0 million in FY 2013 and $37.0 million in FY 2012,

the last two full fiscal years in which the State Lottery ran its sales and marketing

operations in-house. The Administration anticipates a $1.02 billion General Fund

transfer from the State Lottery Fund in FY 2016 and a $955.0 million transfer in FY 2015

after $965.0 million was transferred in FY 2014, $965.0 million in FY 2013 (excluding a

one-time $120.0 million prepayment by Northstar), and $950.1 million in FY 2012.

Page H-3 of the Governor's FY 2016 Budget lists the programs that Lottery proceeds

would partially fund.

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The Administration proposes increasing by $3.9 million from $13.0 million in FY 2015

to $16.9 million in FY 2016 the off-budget appropriation from the various State pension

funds to the Division of Investment to cover the expenses the division incurs in

managing the funds' investment portfolios. But the total does not include

compensation payments to outside money managers, as the division makes these

payments directly from the assets placed with the investment firms and their earnings.

In FY 2014, the division paid $600.2 million in management and performance fees and

expenses to private investment firms.

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As in past years, the Governor's FY 2016 Budget includes broad language that would

permit the appropriation of additional resources for the Division of Taxation and the

Division of Revenue and Enterprise Services without further legislative action.

DEBT SERVICE

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The Governor's FY 2016 Budget includes $3.47 billion in on-budget payments to

service general obligation and appropriation-backed bonds. Based on the FY 2014 State

of New Jersey Debt Report, the OLS estimates that an additional $206.9 million in off-

budget debt service payments bring total recommended FY 2016 State debt service

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