N.J. tax collections ‘falling off the cliff’ in coronavirus crisis, Murphy says

Posted Apr 15, 2020

New Jersey’s tax revenues are “falling off the cliff,” Gov. Phil Murphy said at a Wednesday press briefing on the coronavirus pandemic.

But it’s not yet clear exactly how far they’ve plunged.

The state Department of Treasury released a new monthly revenue update Wednesday that, while a report on March revenues, actually is a reflection of February activity.

That’s why the latest report shows tax revenues increasing by 3.6 percent in March, with gross income tax collections up 7.1 percent over this time last year, corporation business taxes up 7.7 percent and sales taxes up 5 percent — all despite economic activity crashing as Murphy ordered businesses closed and people to stay home to slow the spread of the virus, treasury explained.

“Treasury has been warning for weeks that the economic impact of the COVID-19 pandemic would not be immediately apparent on the state’s finances because many of the major revenues report with a one-month lag,” the department said in a statement accompanying the revenue numbers.

“As a result, March revenue collections largely reflect February economic behavior, which was prior to the onset of many social and commercial restrictions designed to help mitigate the spread of coronavirus.”

The Treasury department is closely watching unemployment claims and stock market activity, which influence tax collections “in coming months,” the department said.

Murphy said Wednesday the expectations that state tax collections nosedive supports the state’s call for more an injection of more federal cash.

“The revenues are off. I don’t have the numbers for you, but they are falling off the cliff," the governor said. "That is part of the reason I was on the phone with Secretary Mnuchin today, underscoring the necessity ‚ the states need direct cash assistance ... The expenses go this way and revenue is going that way.”

The coronavirus is dealing New Jersey’s budget a painful blow. Tax collections are at risk as hundreds of thousands of New Jerseyans are out of work and businesses are closed.

Nationally, retail sales plunged 8.7 percent last month, according to the U.S. Department of Commerce.

New Jersey’s tax revenues were strong heading into March; the treasurer had even raised her estimate of how much money the state would take in this year by nearly $1 billion. But the pandemic is expected to wipe away those gains.

Bracing for falling revenues, Murphy froze $920 million in discretionary spending last month, including funding for popular Homestead property tax credits.

On Monday, Moody’s Investors Service lowered the state’s credit outlook to negative based on its expectation the state will face funding shortfalls this year and next.

New Jersey is considered least prepared among U.S. states to weather a crisis such as this, due in part to its relatively small cash reserves.

The Garden State was calling out in a report from Fitch Ratings as a state that is “more vulnerable to the adverse economic conditions posed by the coronavirus pandemic" because of “lower levels of financial resilience.”

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