Treasury Delivers Updated Revenue Projections to Assembly Budget Committee for FY 2024-25
Revenue Collections In Line With Revised Forecasts

(TRENTON) – The Department of the Treasury testified before the Assembly Budget Committee at the State House today, providing a detailed update on revenue projections for the remainder of Fiscal Year 2024 through Fiscal Year 2025 after analyzing collections for the all-important month of April.

The following is a copy of the testimony, as prepared for delivery:

ASSEMBLY BUDGET AND APPROPRIATIONS COMMITTEE HEARING

State Treasurer Elizabeth Maher Muoio

Testimony as Prepared for Delivery

May 15, 2024

Good morning Chairwoman Pintor Marin, Vice Chairman Wimberly, and members of the committee.

Thank you for the opportunity to come before you today to discuss the updated revenue forecasts for FY2024 and FY2025 budgets, as well as Treasury’s departmental budget.

As always, with me today are my colleagues – Acting Director of the Office of Management and Budget (OMB) Tariq Shabazz, Deputy Director of OMB Hannah Good, Martin Poethke, the Director of our Office of Revenue and Economic Analysis (OREA), and Treasury Chief of Staff, Jo-Ann Povia. Deputy Treasurer Aaron Binder sends his regards. He is unable to attend today due to a health issue. I would like to thank each of them, as well as my front office, and the staff of OMB, OREA, and our other divisions, many of whom have joined us here today or are listening in remotely, for their tireless dedication and professionalism throughout this past year.

When I last came before you eight weeks ago, I noted that our overall revenue forecasts for FY2024 had been reduced slightly by $503 million, or less than one percent, from the level certified in the Appropriations Act last June. Today, I am here to report that collections remain in line with those revised forecasts. Indeed, we are increasing the FY2024 revenue forecast by $58.8 million, up only 0.1 percent. This amounts to a total aggregate FY2024 forecast of $52.3 billion. In forecasting terms, that’s a bullseye, and after the revenue roller coaster ride during and after the pandemic, such stability is more than welcome.  No one has spent more time and effort navigating that roller coaster than both our Office of Revenue and Economic Analysis, and the Office of Legislative Services, and I’d like to both thank them for their dedicated work and congratulate them on so successfully forecasting this year’s revenues.

For next year, FY2025, we are also slightly increasing the aggregate forecast by a total of $140.2 million to $54.3 billion.

So, rather than an “April Surprise”, our revenues are essentially on target.

Focusing first on Gross Income Tax (GIT), for FY2024 we have slightly decreased our forecast by $58.4 million. Final income tax payments were flat last year, rather than rising slightly as we had expected. On the other hand, April’s important first quarter estimated payments for Tax Year 2024 rose by about 20 percent and wage withholding collections continue to grow by about 5 percent.

With strong growth in wages, a doubling of the State’s child tax credit, and a significant inflation adjustment to the federal earned income tax credit, refunds were expected to increase notably during the spring filing season. Taxpayers reconciled being over-withheld and claimed those vital tax credits. Refund issuances remain above historical trend, but have been in line with our revised forecast.

Also, as we discussed with you at the end of March, one of the primary factors affecting FY2024 GIT revenue had been increased refund issuances associated with pass-through entity tax (PTBAIT) credit claims during the fall extension filing period. This pattern is expected to be a part of the revenue picture for the foreseeable future and continue to shift refund activity into the fall.

For FY2025 we have slightly increased our GIT forecast by $44.7 million, projecting 4.0 percent overall growth consistent with average historical growth for this tax. Wages and income are projected to continue growing in the 4.0 percent range as well, quarterly estimated payments are expected to rise, and refund payment growth is expected to slow next spring. Only the filing extension period at the end of calendar year 2024 is expected to see flat collections as an echo of the flat final payments and elevated refunds booked this April.

The Sales Tax has performed in step with our expectations, growing slightly below the rate of regional price inflation, a pattern that is expected to continue into next year. Our FY2024 forecast is unchanged. The small $17.5 million downward adjustment in the FY2025 forecast is related to the now anticipated 3-month implementation delay in the phase-out of the Sales Tax exemption for electric vehicles. Also, energy-related Sales Tax revenues, which are prepaid by the utility companies, are not down as much as anticipated, resulting in an upward forecast revision in both years.

The Corporation Business Tax (CBT) forecasts are increased by $92.7 million in FY2024 and by $129.5 million in FY2025. CBT revenues rose in April compared to last year, thanks to stronger than expected final payments and a slowdown in refunds. The expiration of the CBT surtax is still expected to reduce estimated payments this spring, but not by quite as much as previously forecasted. Therefore, we have adjusted the CBT forecast up in each of the two fiscal years.

Besides the PTBAIT, the trends for a number of the other tax revenues are improved compared to our February outlook; not dramatically, but by enough to allow for small upward revisions. However, the PTBAIT forecasts are reduced by $154.7 million in FY2024 and by $125.8 million in FY2025. PTBAIT extension and final payments came in lower than anticipated, which is expected to negatively impact the early part of FY2025 with extension returns being due in September.

In conclusion with regard to our revenue update, I want to again thank OREA and OLS for their stellar work, and we look forward to working with all of you in the coming weeks as the FY2025 Budget is finalized.

We are now happy to take any questions you may have related to the revenue update, and will then follow after those questions with our departmental budget remarks.

DEPARTMENT HIGHLIGHTS

I would like to turn now to the outstanding work done by the divisions of the Department of the Treasury in the past year.

As has been the case since I became Treasurer, the department played a critical role this year in leading some of the most high-profile initiatives undertaken by the State. In delivering on these important programs and projects, Treasury staff has exhibited the highest degree of professionalism while routinely turning in strong results.

Following are some examples of those efforts:

The Division of Taxation once again took on the responsibility of administering the ANCHOR tax relief program, the largest tax relief program ever undertaken by the State.  This year, more than 1.8 million New Jersey residents qualified for and received over $2.1 billion in tax relief payments.

The level of outreach undertaken to alert taxpayers of the program sparked unprecedented interest and the Division’s efforts to deliver the payouts quickly and efficiently were extraordinary. As part of those efforts, call center staff answered more than 245,000 calls. Another 2.2 million callers had their questions answered through the automated phone system.  Division staff responded to 42,000 emails, and 34,000 applicants were helped in-person at our Regional Information Centers.  119 outreach events were held where taxpayers could have questions answered and receive one on one assistance filing an application. A marketing campaign that included door-to-door canvassing vastly increased awareness and filing was automated for approximately 1.3 million taxpayers who had received the benefit in the prior year. This extremely popular tax relief program is proposed to be fully funded again for a third year in FY2025 and we expect participation to be even more robust in the coming year.

In addition to ANCHOR, the Division of Taxation continues to administer several other tax relief programs, including the expanded Senior Freeze property tax rebate, Child Care Tax Credit, the expanded Child and Dependent Care Credit and the expanded Earned Income Tax Credit.  The Division has also provided extensive support to the Stay NJ Task Force, which is charged with putting forth recommendations later this month on how to implement the new Stay NJ property tax relief program.

As part of our efforts to encourage diversity in the business community, last year Treasury launched the LGBTQ plus-owned business certification process.  Earlier this month, the governor signed legislation codifying the process, ensuring that the certification will remain.

This important certification joins several others offered by the State, including Small Business Enterprises, Minority Owned Businesses, Woman Owned businesses, Veteran Owned Businesses and Disabled Veteran Owned Businesses.

In all, we have issued a total of 13,759 certifications in one or more of these categories.

This summer, pursuant to P.L. 2023, c.300, we will be launching the Socially and Economically Disadvantaged (SED) business certification program, which will recognize businesses that are at least 51 percent owned, operated, and controlled by a person or persons who are both socially and economically disadvantaged.

Our Unclaimed Property Administration had a banner year in FY2023, returning a record $202.95 million in assets to rightful owners, the result of 73,686 claims filed with the agency. This effort, fueled by extensive community outreach, far surpassed UPA’s previous record set in Fiscal Year 2022, when $164.13 million in assets were returned via 50,867 claims filed. UPA has again eclipsed its record in FY2024, returning $222 million in assets to 97,000 rightful owners through April. In January, UPA issued a $3,074,439 contribution to NJ SHARES for assisting New Jersey residents with utility costs.

In January, the governor released the most comprehensive statewide disparity study ever conducted in New Jersey, examining public contracting opportunities for Minority and Women-Owned (MWBE) businesses.

The Office of Diversity and Inclusion, led first by former Chief Diversity Officer Hester Agudosi, and now by current CDO, Candice Alfonso, who is here with us today, oversaw the study, which encompassed more than 1.2 million records and 240,000 contracts from over 60 contracting agencies, including higher education institutions, authorities, and NJ Transit. The study, conducted by Mason Tillman Associates, also included extensive community outreach to the state’s diverse business organizations. Now that it has been completed, the study will provide a foundation for additional initiatives to address disparities in State contracting.

While the study was proceeding, Treasury undertook a series of initiatives to promote equitable contracting practices. For example, after determining that the lack of a Statewide, centralized repository with uniform data for collection and retrieval made it harder to analyze contractor diversity, in January 2023, Treasury launched a Statewide web-based Supplier Diversity Management System (SDMS) to collect vendor, contract, and diverse spending data. The SDMS will allow for real-time monitoring and analysis of Statewide diverse spending data, so State procurement entities are better able to track and increase their spend with diverse businesses.

This June, the Division of Investment is hosting its second symposium to promote its Emerging Managers program. This initiative was launched in 2022 to diversify the private markets portfolio for New Jersey’s pension fund, and build the next generation of investment talent. Over 500 people from across the world attended last year’s virtual symposium, and we look forward to connecting with more up-and-coming fund managers this year and building on the success of the Emerging Managers Platform.

Lottery continued to show strong results in the past year, reporting a record $3.73 billion in FY2023 sales, a 2.55% increase over the previous year.

The strong sales led to the Lottery’s largest ever contribution of $1.17 billion to support New Jersey’s public employee pension system for teachers, police, firefighters, and other public employees. This is the sixth time the Lottery’s contribution has surpassed one billion dollars.

I would also like to highlight the extraordinary work done by this administration and Treasury’s Office of Public Finance in continuing to reduce New Jersey’s debt.

Last month, we released the FY2023 debt report, which showed overall State debt down $38.1 billion since 2018, while bonded debt has hit its lowest level in a decade. These numbers are the result of a concerted effort to reduce overall debt that includes three full pension payments in the past three years and a fourth proposed in the budget you have before you, as well as total deposits of $9.25 billion in debt defeasance and avoidance funding.

As you can see, the scope of Treasury’s work continues to expand. In an effort to keep up with increased demand and operate as efficiently and effectively as possible, the Department has focused significant resources into our information technology systems.

To that end, I would like to outline a small sampling of the exciting technology projects happening within Treasury.

The Division of Taxation began work on its Tax Systems Modernization Project in January 2022.  This project will result in the replacement of the Division’s separate tax administration and collection systems, which date back to the mid-1980’s, with a more versatile, integrated system.

The Division also is working to implement a customer-based appointment scheduling application, which is crucial to modernizing and enhancing the customer experience by allowing taxpayers to schedule appointments at their convenience.

Taxation is additionally engaged in an ongoing call-center-modernization project, which aims to decrease call volume by implementing self-serve tools, enabling more callers to find answers to their questions independently and to enhance agent efficiency through automation and additional contact channels.

At OMB, we are currently in the early stages of overhauling the State’s 30 plus year old accounting system, NJCFS. This multi-year project will touch all of our State departments and allow us to move forward with a government-wide accounting system that meets current industry standards.

The Division of Risk Management is in the midst of replacing a 35-year-old Risk Management Information System (RMIS) with a new Cloud Based System to operate more efficiently, produce meaningful reports and fully automate our claim processing from initial report to final resolution.

Late last year, the Division of Property Management and Construction began using an online bidding platform and has been transitioning away from paper bids. DPMC expects that by the end of CY 2024 we will be accepting over 90% of our bids electronically.

The Lottery is working to integrate a personal data verification tool into its claim and payment system.  This will allow the Lottery to verify player data in real time without a lengthy back and forth process with claimants that delays the processing of claims.

And finally, in the Division of Pensions and Benefits, the Mainframe Refactoring project will modernize the outdated application that the Division staff currently utilize and provide them with a more effective system that does not rely on outside developers to make simple changes.

These are just some of the upgrades underway to better ensure that we are able to serve our constituents both quickly and efficiently, now and in the future.

As always, I would like to thank each and every employee of the Department of the Treasury for the hard work, dedication, and professionalism they display every day.  They continue to meet every challenge and deliver the very best results.

I am happy to take questions at this time.