TRENTON — A research project by a state legislative worker inadvertently uncovered a $200 million bombshell, something New Jersey budget crunchers had missed when interpreting New York state tax regulations. He noticed a line on page 49 of a New York income tax instruction form, a big red flag in black and white. "Caution," it said, with an exclamation...
State Treasurer Andrew Sidamon-Eristoff, left, watches as David Rosen, Legislative and Budget Finance Officer of the Office of Legislative Services, testifies before the Senate Budget Committee at the Statehouse Tuesday morning.
TRENTON — A research project by a state legislative worker inadvertently uncovered a $200 million bombshell, something New Jersey budget crunchers had missed when interpreting New York state tax regulations.
He noticed a line on page 49 of a New York income tax instruction form, a big red flag in black and white. "Caution," it said, with an exclamation point inside a triangle sign. People making more than $100,000 should not use the tax tables as a guide because of new New York state tax increases.
But that’s exactly what New Jersey officials did more than a year ago — and by doing so miscalculated the amount residents who commute to New York could write off their Garden State tax bills. The result is the state overestimated what it would collect from those residents, possibly by more than $200 million."We literally stumbled across it," said David Rosen, the budget and finance officer for the Office of Legislative Services, who yesterday described his colleague’s findings to the Senate budget committee.
The discovery, made Thursday, could explain why budget forecasters so badly missed their targets this year, leading to the Christie administration yesterday proposing $325 million in additional changes for the budget year that ends June 30.
State Treasurer Andrew Sidamon-Eristoff, who used to run New York state’s taxation department, said he would have been able to warn the state its budget numbers were off — if anyone on his staff had bothered to ask him. He thought they had already figured that into budget projections inherited from the Corzine administration.
"Had anybody asked me, or thought to ask me, I would have said, well, in the past it has been the practice in New York state," he told reporters yesterday. "I don’t know why they didn’t take it into account."
Apparently, though, nobody from Treasury did ask him. So with less than five weeks to go in the budget year, the Christie administration nipped and tucked. It reverted to tactics it previously lambasted — raiding disability funds, moving money from one year to the next — to close the gap.
Rosen said descriptions of New York state’s tax increases -- official New York state reports and in the press - were confusing and misleading. But the New York state department of taxation and finance said New Jersey should have known.
"The supplemental tax is not new, it has existed in New York tax law since 1991," spokesman Brad Maione said in a statement. "In both 2003 and 2009 when we previously enacted temporary rate increases, the supplemental tax was included. Our web site, forms, instructions and publications all clearly describe how the supplemental tax works."
Officials plan to test this "hypothesis" to see if it’s correct, but what is certain is the state needs to make adjustments for the shortfall of about 1.2 percent of revenues. The changes include $70 million for economic development payments delayed to the next budget year and $25 million from the state disability benefit fund, which pays for benefits when workers are hurt.
Sidamon-Eristoff said there would be no service cuts as a result of the latest round of cuts.
"I’m not aware of any of these changes that will have an immediate impact on services to the public," he said.
Sidamon-Eristoff said the state will dip into a year-end surplus — a last-resort, rainy day fund — to close new, related gaps in the budget that takes effect July 1. Christie and the Democrat-controlled legislature have been fighting over the proposed budget for months.
Sen. Paul Sarlo (D-Bergen), chairman of the Senate budget committee, criticized the administration for resorting to methods it criticized previous governors and lawmakers for using.
"Are raids of these funds a good thing?" Sarlo asked.
"They’re a hard choice, senator," Sidamon-Eristoff said.