An Act establishing a surplus revenue reserve account from certain levels of unanticipated gross income tax revenue collections, supplementing Title 54A of the New Jersey Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. There is established within the Property Tax Relief Fund a restricted reserve account to be known as the Surplus Gross Income Tax Revenue Account. The State Treasurer shall credit to the Surplus Gross Income Tax Revenue Account, on or before December 31, 2015 and annually on or before December 31 thereafter, and in addition to any amount appropriated to the Surplus Gross Income Tax Revenue Account, the amounts determined pursuant to section 2 of this act. Monies credited to the Surplus Gross Income Tax Revenue Account may be invested in the same manner as assets of the Property Tax Relief Fund and any investment earnings on the Surplus Gross Income Tax Revenue Account shall accrue to the account and shall be available subject to the same terms and conditions as other balances under this act. The State Treasurer may determine the amount of earnings to be credited to the Surplus Gross Income Tax Revenue Account to reflect the average rate of return on the State of New Jersey Cash Management Fund. The State Treasurer shall provide a report of the status of the Surplus Gross Income Tax Revenue Account to the Governor and to the Legislature through the Joint Budget Oversight Committee, or its successor, periodically, but not less often than annually on or about January 15.

2. a. As used in this section "anticipated revenue" means the amount of revenue estimated to be realized in a fiscal year as New Jersey gross income tax resources to support appropriations made, but not including revenue transfers to the Property Tax Relief Fund from other funds in the State Treasury.

b. The amount to be annually credited to the Surplus Gross Income Tax Revenue Account shall be determined by the State Treasurer in the following manner:

(1) The State Treasurer shall identify the amount of anticipated revenue from the New Jersey gross income tax certified by the Governor upon approval of the annual appropriation act for the fiscal year immediately preceding the fiscal year in which a credit to the Surplus Gross Income Tax Revenue Account is required.

(2) The State Treasurer shall determine, from the annual financial report of the Property Tax Relief Fund for the fiscal year immediately preceding the fiscal year in which a credit to the Surplus Gross Income Tax Revenue Account is required, the amount of gross income revenue actually deposited in the Property Tax Relief Fund in that fiscal year. If in any preceding fiscal year for which a determination under this subsection is to be made, there is a State law enacted which will increase the gross income tax revenue to the Property Tax Relief Fund, the yield from that increase for that preceding fiscal year in which the increase is in effect shall be disregarded in determining the amount to be credited to the Surplus Gross Income Tax Revenue Account.

(3) The amount of the credit to the Surplus Gross Income Tax Revenue Account shall be an amount equivalent to one-half of the excess, if there be any, of the amount determined in paragraph (2) of this subsection that exceeds by more than 6% the amount determined in paragraph (1) of this subsection.

c. The Governor shall include in the annual budget message to the Legislature an estimate of the credit to be made to the Surplus Gross Income Tax Revenue Account as a reduction of the estimated undesignated fund balance in the Property Tax Relief Fund as of July 1 of the fiscal year for which he is making the budget recommendations.

3. Balances in the Surplus Gross Income Tax Revenue Account shall not be available for appropriation except as provided in this act. Balances in the Surplus Gross Income Tax Revenue Account may be appropriated by the Legislature only:

a. upon separate certification by the Governor that anticipated gross income tax revenues in the Property Tax Relief Fund are estimated to be less than those certified by the Governor upon approval of the annual appropriation act; or

b. upon a finding by the Legislature, based on its research, that to offset gross income tax revenue declines anticipated in the Property Tax Relief Fund an appropriation from the Surplus Gross Income Tax Revenue Account is a more prudent fiscal policy than increasing any rate of gross income tax imposed or otherwise modifying the gross income tax, including elimination or modification of deductions, exclusions or exemptions, in a manner that will increase gross tax collections or reduce taxpayer gross income tax refunds

The provisions of this section shall not be construed to render balances in the Surplus Gross Income Tax Revenue Account unavailable for meeting the costs of any emergency identified by the Governor that is within the purposes of the Property Tax Relief Fund. Balances in the account are appropriated for that purpose, provided however, that the Governor shall notify the Joint Budget Oversight Committee, or its successor, of his determination that balances in the account are required to meet an emergency, describing the nature of the emergency and the intended use of the funds in meeting the emergency. Upon notice to the Governor that such expenditures have been approved by the committee, or its successor, the expenditure of such funds shall be lawful. As used in this section, "emergency" means any condition or occurrence which requires an immediate response in the protection of the life, safety or well-being of the citizens of this State, or any of them, or in the protection or restoration of property, public or private, endangered, damaged, or destroyed as a result, actual or potential, of such condition or occurrence.

4. a. If in any fiscal year there is enacted an appropriation from the Surplus Gross Income Tax Revenue Account pursuant to section 3 of this act, there shall not be enacted any imposition of increases in existing gross income tax rates or gross income tax modifications having the effect of increasing gross income tax revenues except as provided in subsection b. of this section.

b. If the amount of the decline in gross income tax revenue collections in the Property Tax Relief Fund is greater than the equivalent of 2% of the total available gross income tax resources in the Property Tax Relief Fund as certified by the Governor upon approval of the annual appropriation act for the fiscal year in which that revenue decline is anticipated, the restrictions of subsection a. of this section shall not apply and the balances in the Surplus Gross Income Tax Revenue Account may be appropriated in any other manner as found to be in the best interests of the fiscal condition of the Property Tax Relief Fund.

5. This act shall take effect immediately.

STATEMENT

This bill establishes a Surplus Gross Income Tax Revenue Account in the Property Tax Relief Fund to serve as a "rainy day fund" for property tax relief programs and State Aid programs that offset local property taxes. The Property Tax Relief Fund as the constitutionally mandated destination for all New Jersey gross income tax collections, has been subject to wide annual swings during recent times preceding, during and following the Great Recession. Official estimates of anticipated gross income tax revenue collections that are important in budgeting for essential, annual direct property taxpayer relief, often has been subject to unexpected ups and downs. One recent example is the failure of State budgets to distribute Homestead Benefits for over 18 months including the entire 2014 calendar year.

A very high portion of such annual gross tax revenue, under a progressive tax rate structure, relies upon the annual tax payments of a very small number of very high income taxpayers. Their annual income levels can be subject to often unforeseen turns and trends in national economic factors and tax policy changes beyond New Jersey's domain.

In order for the State to better budget for the annual appropriations that largely funded from this revenue source, it is necessary to keep a reasonable portion of this annual revenue in reserve during periods in which tax collections exceed anticipated amounts so some modest balance of this funding source is maintained and is available for periods during which projected tax collections falter below budgeted expectations. The administration of this reserve account is based upon the Surplus Revenue Fund established for General Fund revenues. However, annual credits to the Surplus Gross Income Tax Revenue Account will be based upon an amount equivalent to one-half of the excess, if there be any, of the amount of gross income tax collections actually collected during a State fiscal year that exceeds by more than 6% the amount certified by the Governor for projected gross income tax collections for that fiscal year when the annual State budget is approved.