Local officials sweat out state budget deficit

Growing restlessness about a multibillion-dollar state deficit and the potentially painful cuts it may trigger are putting worry lines on the faces of New Jersey mayors and school officials. Money they can't get from the state likely would have to be made up through pared-down services and staff cuts, or through higher property taxes, an issue that's already an enormous sore spot in a state that relies heavily on those taxes to operate schools and towns. Also, municipal and school official fear New Jersey's fiscal 2006 budget could deepen a wound opened by the Bush administration's federal budget proposal that would eliminate grant programs that funnel millions of dollars to towns. Under New Jersey's current $28 billion budget, schools and municipalities got a combined $10.6 billion, an increase of $824 million, according to the state Treasurer's office. But school officials note that increase followed years of stagnant aid. Acting Gov. Richard J. Codey has said helping schools and towns is a priority, but an increase in aid this year is unrealistic. ``We're hopeful Governor Codey can maintain the numbers of last year,'' Bollwage said. That sentiment is shared across the state. But William Dressel, executive director of the New Jersey State League of Municipalities, said state aid at last year's levels amounts to a cut when balanced against higher operating expenses. ``The closer we get to March 1, the day the governor unveils his budget blueprint for the state, it becomes abundantly clear we have all the makings for a nightmarish budget year,'' Dressel said. School officials agree and point to pressures caused by newly enacted limits on how much they can increase their budgets. The restrictions were passed last year to help rein in property taxes. New Jersey's budget deficit is projected to be $4 billion. By law, a balanced budget must be enacted by July 1. How that is to be accomplished is uncertain. Like a lot of states, New Jersey has dealt with year-to-year deficits, and the list of budget fixes has dwindled. Options being looked at this year include scaling back the state rebates residents get that are intended as property tax relief. Codey's administration is also considering taxing contributions to 401(k) savings plans, among other proposals. Over the past few budget cycles, the state generated extra revenues through higher per-pack taxes on cigarettes. It also boosted the sales tax on cosmetic surgery. The cost of a hotel or motel stay has also gone up, thanks to a tax placed on rooms; corporations have seen their tax rates rise, as did New Jersey's nearly 30,000 residents earning $500,000 or more a year. The state has also borrowed. And borrowed. Political analysts and fiscal experts say borrowing is a key reason New Jersey is boxed into a corner, as payment on that debt joins other immovable costs in the budget