Governor Unveils Fiscal 2010 State Spending Plan
Governor Jon S. Corzine presented his fiscal 2010 state budget proposal to members of the legislature earlier today. The $29.8 billion proposed spending plan contains spending reductions, tax increases, and relies on federal assistance to make up for the projected $7 billion shortfall for the new fiscal year that begins July 1. The Governor was able to present a balanced budget proposal by suggesting $4 billion in spending cuts, utilizing $2 billion from the federal stimulus funds and proposing $1 billion in tax increases. Governor Corzine said his plan contains $1 billion less in spending than the fiscal 2006 budget.
The proposals most important to the employer community include:
- Imposing a one year 5 percent surcharge on income tax liability for residents earning more than $500,000 per year. Originally floated as a tax for those earning $250,000 or more, the Governor, after receiving feedback from State Chamber representatives, recognized the fact that it would impact small businesses, so he increased the threshold.
- Extending the 4 percent surtax that was imposed on businesses in 2006 as part of their overall corporate business tax (CBT) liability. This surtax was due to expire at the end of the 2009 fiscal year. The Administration has committed to a one year only extension of the CBT surcharge.
- Providing $270 million to the Unemployment Insurance Trust Fund, which needs approximately $500 million to remain solvent. The deficit in the fund is expected to trigger a payroll tax increase of between $70 to $85 per employee. The Governor has also committed to forwarding legislation that would require a payroll tax decrease when the fund replenishes and the economy improves, which was a recommendation of the New Jersey Chamber of Commerce.
- Funding charity care at the same level as last year, $640 million. In addition, family care would increase by $193 million.
Other highlights include:
- Eliminating property tax rebates, except for seniors, disabled residents and those making less than $75,000 per year. This will save $500 million.
- Imposing additional taxes on liquor, wine and cigarettes tax to raise $30 million.
- Freezing state worker wages and requiring them to take unpaid furlough days for savings of nearly $400 million.
- Decreasing aid to municipalities by 2 percent. The proposal still includes incentive dollars to encourage more government consolidation and shared services.
- Increasing direct aid to school districts by $300 million.
The NJ State Chamber issued the following media statement with regard to the payroll tax increase:
By Joan Verplanck, President, New Jersey Chamber of Commerce
These are tough times and the employer community fully expects to make sacrifices along with others in order to help balance the budget. However, struggling employers and employees are not willing to bear an inordinate amount of the burden, and we expect the members of the legislature and Governor to follow through with proposals such as spending cuts, furloughs, wage freezes and programmatic cuts in order to get us through this crisis.
Our companies already pay higher taxes when compared to the rest of the nation and now the employer community is being asked to fund an increased payroll tax to replenish the Unemployment Insurance (UI) Trust Fund. We warned for 10 years of the irresponsibility of diverting billions out of the fund because we would need that money for the unemployed if the economy soured.
Once again, 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. Let's just hope that our leaders learn from our past mistakes. Unemployment funds are to be used solely for those who have lost their jobs through no fault of their own.
