Corzine's $29.8B budget plan rests on shoulders of business

The plan for the year beginning July 1 calls for spending around $3 billion less than the current state budget — which the administration is calling the largest one-year spending reduction in state history. The budget comes during a recession that has depressed tax revenues and has helped cause what the administration is calling a $7 billion deficit in the state’s finances.

“We all have to share the responsibility of keeping our financial house in order,” Corzine said in his noon address to a joint session of the Legislature. “The unprecedented circumstances of our national economic crisis requires choices we might not otherwise make.”

As expected, Corzine proposed a wage freeze and furloughs for state employees that would save the state $400 million. He did not specify how long the furloughs would be, but he has previously said he wants workers to take 12 unpaid days off.

He also called for “small” increases in cigarette and alcohol taxes — though he made clear in the address that beer would be exempted from this increase.

Business leaders attacked Corzine’s call to increase payroll taxes on employers to shore up the Unemployment Insurance Trust Fund. The fund, maintained mostly through payroll taxes on employers, is low primarily because it has been raided by prior administrations, with an estimated $4.7 billion siphoned off for other purposes over the past 15 years. “Asking employers to pay for the sins of past — that’s disturbing,” said Jim Leonard, legislative lobbyist for the New Jersey Chamber of Commerce.

The size of the payroll increases would have been higher if not for the state this year shifting $270 million into the fund, with the federal stimulus dropping in another $207 million.

Corzine said the state would have to shift another $500 million to avert the payroll tax increase.

“We cannot make that kind of payment while still maintaining our priorities and preserving property tax relief,” Corzine said. The governor said he would seek legislation to “require a tax decrease” on the unemployment insurance payroll tax when the fund becomes healthy in a growing economy, but he did not offer details.

Joan Verplanck, president of the New Jersey Chamber of Commerce, said she hopes the governor will support legislation that would cap the amount of money that can accumulate in the trust fund at which point the payroll tax would be suspended.

“The employer community is willing to do its part to get us through this economic crisis, provided government keeps up its end of the bargain,” Verplanck said. “Let’s just hope that our leaders learn from our past mistakes.”

Corzine called for individuals making more than $500,000 to take a one-year income tax rate increase of 0.75 percent, which could hurt some businesses — such as S corporations — that are structured so taxes are paid through the owners’ income taxes, said Philip Kirschner, president of the New Jersey Business & Industry Association.

The budget preserves property tax rebates for renters and households earning $75,000 or less, Corzine said, but he called for eliminating the property tax deduction from state income taxes for all homeowners except seniors, Corzine said.

“This budget continues a four-year pattern of making tough choices that may not be politically popular today, but which put our state on stronger footing tomorrow,” Corzine said. “By making the right decision now, New Jersey can and will emerge from this national economic crisis stronger, sooner and more prosperous.”

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