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N.J. Budget Creeping To Finish

State Senate Budget Committee Approves Budget Bill

POSTED: 9:27 am EDT June 30, 2006
UPDATED: 1:58 am EDT July 8, 2006

As New Jersey began an eighth day without full government services and a fourth day without casino gambling, lawmakers sluggishly edged toward voting on a budget plan that would get the state back on track but would increase the sales tax.

The state Senate's Budget Committee approved the state budget bill by a vote of 10-5 along party lines. The vote, which releases the spending plan to the full Senate, came around 1:45 a.m.

Committees of the Senate and Assembly spent Friday night reviewing the $30.8 billion budget legislation, which was expected to pass following a deal struck by the governor and lawmakers Thursday.

By midnight, the committees had approved some tax bills, but final votes by the full Assembly and Senate still appeared to be hours away.

Gov. Jon S. Corzine's staff said they weren't sure when the governor would sign the budget, emphasizing he would take time to review it.

New Jersey's 12 casinos, which closed Wednesday, were expected to resume operations within hours after the budget passed both houses. On Monday, 45,000 furloughed state workers could also return to work, although exact plans haven't been announced. State parks would reopen and lottery sales resume.

The budget crisis began when Democrats who control the state Assembly balked at the Democratic governor's proposal to increase the sales tax. The resulting impasse caused the Legislature to miss the July 1 deadline for passing a new budget. With no authority to spend money, Corzine ordered nonessential government services suspended.

Under a compromise reached Thursday, Corzine and Assembly Speaker Joseph Roberts Jr. agreed to increase the sales tax from 6 percent to 7 percent, but put half the money received from the increase toward relieving the state's highest-in-the-nation property taxes.

The tax increase would raise $1.1 billion. Corzine had wanted all the money to go toward helping close a $4.5 billion budget deficit and help ease future budget woes, but Roberts and other tax increase opponents refused to yield unless money earned from it went toward cutting property taxes.

The sales tax increase will cost the average New Jersey family $275 per year, according to fiscal experts.

As part of the deal, to ensure the sales tax money doesn't get spent elsewhere, Roberts introduced two constitutional amendments Friday. One would ask voters in November to dedicate half the sales tax increase revenue this year to property tax relief and the other would ask them in November 2007 to dedicate all the sales tax increase revenue to property tax relief.

"If we're to ask New Jerseyans to consider to embrace a sales tax increase, we need to give them a say in terms of how the money is going to spent, and it is my opinion that they would be willing to tolerate that only if it's going to be used to deal with what is the number one problem in our state," Roberts said Friday afternoon.

The second amendment differs from what Corzine said when he announced the budget agreement on Thursday. Corzine said dedicating all the sales tax increase money to property tax relief was an "absolute goal" depending upon "if we restore fiscal integrity to the state's budget."

"It certainly is a goal. However, we are also aware that next year's deficit will already be around $2 billion," Corzine spokesman Anthony Coley said. "As the governor said yesterday, when we restore fiscal integrity to our state's budget once and for all, he is committed to using the revenues generated by the sales tax increase to property tax relief."

The spending plan also would create and increase other taxes, including those on corporate income, businesses in urban redevelopment zones, cigarettes, energy facilities, rental cars, HMO premiums, snuff tobacco, commercial property sales, fur clothing and vehicles that cost more than $45,000 or get less than 19 miles per gallon.

It would also extend the sales tax to other items and take $50 million from a fund generated by temporary disability benefit taxes and instead use the money to pay for state spending.

In all, the $31 billion budget plan appeared to have about $1.8 billion in tax increases.

"It just exacerbates the concerns people have about taxing everything you do," said Assemblyman Joseph Malone, R-Burlington.

The budget bill also had about $270 million in special projects added late Friday by legislators, including many that would help municipalities and organizations represented by key Democratic leaders.

The budget calls for contributing $1.1 billion to the state's public employee pension fund, but contains no increase in property tax rebates for senior and disabled citizens and those earning less than $70,000 per year. Those earning more would see their rebates cut $100.

As the Senate budget panel discussed legislation related to the sales tax increase Friday night, Senate Republican Leader Leonard Lance cautioned his colleagues against enacting "unwise public policy," and said "we will regret what may occur here this evening."

The casino closings, the first in the 28-year history of legal gambling in New Jersey, turned normally bustling slot parlors and blackjack pits into oddly silent areas roped off and protected by security guards. The gambling halls had to shut down because they require state inspectors on the scene to operate.

That forced some 36,000 dealers, cocktail servers and slot machine attendants off the job, too. Casino restaurants closed and bus lines stopped sending motor coaches to Atlantic City because few people wanted to go if they couldn't gamble.

Operators and their customers criticized the state for ordering the closings, saying the $1.3 million in daily tax revenue they add to state coffers made them the wrong targets for cost-cutting in a budget crunch. They also were frustrated by the delay Friday, having called in workers Thursday after word leaked of the deal, only to find out later they couldn't reopen until the Legislature voted on the budget.

Tony Rodio, regional president of the Atlantic City Hilton and sister property Resorts Atlantic City, said the casinos were being inundated with calls from customers wanting to know when they would reopen. Casino officials didn't know what to tell them because of lingering uncertainty in Trenton.

"Regardless of the hour, if they tell us we can open at 2 a.m., we'll open at 2 a.m.," said Rodio. "The property is ready to go. Literally, all we have to do is take down the stanchions and the signs and open the property back up."

Daniel Heneghan, public information officer for the New Jersey Casino Control Commission, said once Corzine's office lifts the emergency shutdown order, the commission's chief would sign an order to open the casinos.

"We have inspectors on call, ready to respond whenever that happens," he said. "As soon as that happens, we will open up casinos as soon as possible."


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