Senator Barbara Buono, Chairwoman of the Senate Budget and Appropriations Committee is urging the Governor to consider mid-year spending cuts in anticipation of sagging state tax collections due to Wall Street's turmoil and the general economic slowdown.
"Hopefully, we won’t have to make cuts in the current budget, but we should be prepared for a worst-case scenario," Buono said. "Regardless of the success of the Wall Street bailout, its impact on New Jersey, both in terms of financial services workers and the industry itself, will be significant."
Earlier this week, Assembly and Senate Republicans made a similar, albeit stronger, request.
New Jersey's income tax structure is "progressive" and relies on the top 1% of wage earners to pay 40% of all income taxes collected. That creates a reliance on high-paying industries - such as financial services - and a slowdown in just one industry can have a significant impact on the state budget.
Here's what no one has mentioned in the public debate: high-wage earners are often boosted into the top 1% based on bonuses and other income sources outside their normal salary. Because of that, their net income is not known with certainty until mid-April of the following year. That puts the legislature and the administration in a position of being forced to forecast the loss, or wait until actual numbers are known - which could create a budget panic. We applaud Sen. Buono for calling for the creation of contingency plans now.
