DEPARTMENT OF THE TREASURY .us

ANALYSIS OF THE NEW JERSEY BUDGET

DEPARTMENT OF THE TREASURY

FISCAL YEAR

2017-2018

PREPARED BY OFFICE OF LEGISLATIVE SERVICES NEW JERSEY LEGISLATURE ? MAY 2017

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 Jennifer Beck (R), 11th District (Part of Monmouth) Anthony R. Bucco (R), 25th District (Parts of Morris and Somerset) Nilsa Cruz-Perez (D), 5th District (Parts of Camden and Gloucester) Sandra B. Cunningham (D), 31st District (Part of Hudson) Patrick J. Diegnan Jr. (D), 18th District (Part of Middlesex) 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) 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 Anthony M. Bucco (R), 25th District (Parts of Morris and Somerset) John DiMaio (R), 23rd District (Parts of Hunterdon, Somerset and Warren) 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) Elizabeth Maher Muoio (D), 15th District (Parts of Hunterdon and Mercer) Declan J. O'Scanlon, Jr. (R), 13th District (Part of Monmouth) Eliana Pintor Marin (D), 29th District (Part of Essex) Maria Rodriguez-Gregg (R), 8th District (Parts of Atlantic, Burlington and Camden) Troy Singleton (D), 7th District (Part of Burlington) Benjie E. Wimberly (D), 35th District (Parts of Bergen and Passaic)

OFFICE OF LEGISLATIVE SERVICES

Frank W. Haines III, Legislative Budget and Finance Officer Thomas Koenig, Assistant Legislative Budget and Finance Officer

Marvin W. Jiggetts, Director, Central Staff Catherine Z. Brennan, 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 authors were Jordan M. DiGiovanni and Luke E. Wolff.

Questions or comments may be directed to the OLS Revenue, Finance and Appropriations Section (Tel: 609-847-3835) or the Legislative Budget and Finance Office (Tel: 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-369 to D-421; E-7; G-4 to G-8

Fiscal Summary ($000)

State Budgeted Federal Funds Other Grand Total

Expended FY 2016

$2,351,670

10,155

1,252,556

$3,614,381

Adjusted Appropriation

FY 2017 $1,990,307

9,326

1,243,559

$3,243,192

Recommended FY 2018

$1,962,797

9,326

1,237,365

$3,209,488

Percent Change 2017-18 (1.4%)

0.0%

(0.5%)

(1.0%)

Personnel Summary - Positions By Funding Source

State

Actual FY 2016

3,700

Revised FY 2017

3,600

Funded FY 2018

3,669

Percent Change 2017-18

1.9%

Federal

48

50

51

2.0%

Other

1,697

1,683

1,716

2.0%

Total Positions

5,445

5,333

5,436

1.9%

FY 2016 (as of December) and revised FY 2017 (as of January) personnel data reflect actual payroll counts. FY 2018 data reflect the number of positions funded.

To be consistent with the data display in the Governor's FY 2018 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

FY 2017-2018

Highlights

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

? The Governor's FY 2018 Budget provides $1.91 billion for property tax relief in the Department of the Treasury, which is a $13.1 million decrease from FY 2017. Grantsin-Aid, which finance direct property tax relief to residents, account for $492.2 million of the total ($35.2 million, or 6.7 percent, less than in FY 2017) and State Aid to local subdivisions of State government accounts for the remaining $1.42 billion ($22.1 million, or 1.6 percent, more than in FY 2017). Table 1 on page 6 lists aggregated components of the recommended State Aid total.

? The Administration recommends a $30.6 million funding decrease in FY 2018 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 592,800 homeowners would collect an average $478 benefit in FY 2018, after 645,700 homeowners collected an average $474 rebate in FY 2017.

? For FY 2018, the Administration recommends maintaining the FY 2017 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 2015 and 2016 in lieu of the statutory $87,007 for tax years 2015 and 2016. Overall, the Executive forecasts a $1,219 average FY 2018 payment to 163,300 participants. In FY 2017, some 167,600 participants received an average $1,217 payment. The anticipated higher average amount is due to 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.

? As proposed, municipalities are to receive $1.136 billion from the off-budget Energy Tax Receipts Property Tax Relief Fund in FY 2018, which is an increase of approximately $5.7 million above FY 2017. Two funding sources comprise this appropriation: $788.5 million from the Energy Tax Receipts Property Tax Relief Fund and an amount not to exceed $347.5 million transferred from the Consolidated Municipal Property Tax Relief Aid account pursuant to newly revised budget language.

? To reduce the State's cash flow borrowing needs, the Administration proposes revising the schedule by which the Energy Tax Receipts Property Tax Relief Fund payments are distributed to municipalities. Specifically, payments would be redistributed such that initial payments would be reduced and final payments would be increased.

? The proposed FY 2018 appropriation to public employee retirement funds equals $2.51 billion, representing 5/10th of the actuarially recommended full $5.02 billion State pension contribution, as projected based on July 1, 2016 actuarial valuation data. The FY 2017 contribution was $1.86 billion. Of the recommended $2.51 billion total, the Governor's FY 2018 Budget allocates $108.9 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

FY 2017-2018

Highlights

TREASURY OPERATIONS

? The Governor's Budget includes an estimated $325.0 million from unspecified "Asset Sales" as Schedule 1 revenues (page C-6). According to the State Treasurer, this anticipated revenue is comprised, in part, of proceeds from the New Jersey Public Broadcasting Authority's participation in the Federal Communications Commission's Broadcast Incentive Auction. The remainder of the anticipated $325.0 million would be derived from the sale of unspecified State properties. A newly proposed general language provision would divert proceeds from the sale of assets to the General Fund as State revenue.

? A total of $600,000 is recommended for Gubernatorial transition costs. This amount is unchanged from the total amount budgeted for this purpose in FY 2002 and FY 2006, of which approximately $551,000 and $309,000 were expended, respectively.

? The Governor's FY 2018 Budget recommends reducing the aggregate appropriation for the Casino Control Commission by $225,000. However, a change in the Services Other Than Personal appropriation for the Casino Control Commission, which is set to increase by $250,000, is for certain information technology integration projects per the Commission's Tactical Plan filed with the Office of Information Technology (OIT). These projects include Employee License System enhancements, OIT security compliance, digital archiving, and SharePoint migration.

? As in past years, the Governor's FY 2018 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.

OFFICE OF INFORMATION TECHNOLOGY

? The Governor's FY 2018 Budget Recommendation proposes to appropriate $26.8 million to OIT to finance the operation and upkeep of the Statewide 9-1-1 emergency telephone system. This recommended appropriation is an increase of $13.7 million, or 104.4 percent, over the adjusted FY 2017 appropriation of $13.1 million. According to the Office of Management and Budget (OMB), the additional funding will be used to transition from the State's existing Statewide 9-1-1 network, which delivers 9-1-1 call routing and location services to local Public Safety Answering Points (PSAPs), to a network that maintains existing services and implements certain Next Generation 9-1-1 features not supported by the current network. The recommended increase is to be partially funded by the imposition of a new fee on pre-paid cellular telephones. According to the Department of the Treasury, this fee is to be imposed through the enactment of a new law, and is estimated to generate $13.0 million in FY 2018.

? The Administration recommends the continuation of budget language on page F-5 of the Governor's FY 2018 Budget Recommendation requiring the OIT to approve all Executive Branch purchase requests for information technology and telecommunications equipment, maintenance, and consultant services. The budget language requires the OIT to determine if purchase requests comply with Statewide policies and standards and the Information Technology Strategic Plan approved for each department. One of these policies is a partial moratorium on the procurement of

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