TRENTON – – Last Thursday, Senator Barbara Buono (D-Middlesex) introduced S-3153, a bill which would require that the Governor’s annual budget message include a State tax expenditure report. The Senator, who also serves as Chairwoman of the Senate Budget and Appropriations Committee, said that she will post the bill when the Senate Budget and Appropriations Committee meets on January 4th.
Each year, the State’s budget process requires lawmakers to conduct an extensive evaluation and documentation of direct spending on a multitude of programs and services. However, as off-budget items, tax expenditures receive far less scrutiny, and are not regularly examined by legislators.
“New Jersey provides tax credits, deductions, and exemptions that serve a public policy goal, yet reduce state revenue,” said Senator Buono. “These tax expenditures should be subject to the same scrutiny that is required of all government spending, especially during this dire economic climate.”
Because most tax expenditures are written into the tax code, they continue indefinitely unless the Legislature acts to discontinue them. Appropriated expenditures from the State’s General Fund, by contrast, typically last as long as the State’s budget cycle, which is one year.
“It is simply unacceptable for any government expenditure to be made without a thorough evaluation of its effectiveness, and a real understanding of its cost to New Jersey’s taxpayers,” said Buono. “This bill will shed light on this forgone State revenue and will help legislators to determine whether or not these off-budget spending items serve their intended policy goals, and whether or not they should be continued.”
According to the bill, the tax expenditure report would be included in the Governor’s annual budget message, which is available online. The report will list the State’s tax credits, deductions, and exemptions along with their costs as well as other relevant information to help legislators evaluate their effectiveness.
“This bill will establish new reporting requirements and will integrate them into the budget process,” said Buono. “If the tax expenditure report is not included in the Governor’s annual message, you can be certain that the respective legislative budget committees will hold the Treasurer accountable when he or she appears before them in the course of the annual budget hearings. This will enhance transparency in government spending.”
The legislation is based upon the best practices identified in the report entitled Promoting State Budget Accountability Through Tax Expenditure Reporting issued by the Center on Budget and Policy Priorities in April of this year. These practices include incorporating the report into the budget process, issuing the report regularly, making it available on the Internet, and detailing the estimated amount of State revenue lost for the last completed fiscal year, the current fiscal year, and the fiscal year to which the budget message applies.
“Right now, New Jersey is one of only nine states that does not issue a tax expenditure report,” said Buono. “When it involves spending decisions, as policymakers we must have information that enables us to continually monitor and evaluate tax expenditures so that informed decisions can be made going forward. Having regular tax expenditure reports will provide the Legislature with the tools to carry out a comprehensive cost-benefit analysis.”