- Associated Press - Wednesday, May 18, 2016

TRENTON, N.J. (AP) - A surprise revenue shortfall of more than $800 million will force Republican Gov. Chris Christie’s administration to cut into programs like charity care and dip into the state’s surplus, officials said Wednesday.

But the roughly $843 million gap in the current and next fiscal year is smaller than a nearly $1 billion budget gap the state faced in 2014, and the Democrat-led Legislature met the news without much criticism.

Assembly Budget Chairman Gary Schaer even complimented Acting Treasurer Ford Scudder for his candor during a hearing on Wednesday.

No reduction is expected in the state’s payment to the public workers’ pension, long a source of disagreement between labor unions and Democrats on one side and Gov. Chris Christie on the other.

Scudder briefed lawmakers as part of the regular budget process, which is heading toward the end of the 2016 fiscal year on June 30. The highlights:

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THE CUTS

To deal with the lower revenues in the current fiscal year, the Christie administration will spend $283 million less than planned on areas including medical assistance and programs to help low-income families.

The administration also plans to use $239 million from the surplus and $81 million in unused supplemental spending mostly due to the mild winter.

To deal with an estimated $240 million shortfall in the fiscal year starting in July, the administration proposes slowing how business grants are converted to tax credits, which Scudder projects would increase business tax revenue.

The administration also is proposing immediately applying the state’s 8.97 percent income tax on big lottery jackpot earnings, rather than when taxes are filed. The administration is also cutting charity care by $25 million, along with cuts to medical assistance and other programs.

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THE DEFICIT

Treasury estimates tax collections for 2016 are about $603 million less than earlier projected and $240 million less than estimated in 2017.

The biggest change comes in a downward revision of the state’s gross income tax estimates in 2016. For 2017, Scudder estimates those revenues will also fall.

But Scudder says New Jersey is not an outlier and that California, Connecticut, Massachusetts and Pennsylvania also saw declining income tax receipts. Legislative forecasters, who predicted a bigger gap of $1.1 billion over the two fiscal years, suggested the decline is due to weak stock market performance.

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THE CONTEXT

The revised forecasts come after budget gaps in 2014 resulted in Christie paying less into the pension than required under a 2011 law to which he and Democrats agreed.

Labor unions and Democrats pressed the case all the way to the state Supreme Court, which handed Christie a victory by ruling last year that lawmakers and the governor would have to work out their differences in the budget process. Democrats then delivered Christie a budget that raised taxes on high-income earners to close the gap.

Christie used his line-item veto to take out the tax hikes and restore the pension cuts to balance the budget, which is required constitutionally.


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