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Treasury raises FY25 forecast after strong April filings, warns of federal risks
Summary
Treasury told the legislative budget committee on May that stronger-than-expected April tax filings raise the FY25 revenue forecast to $55.3 billion and lift FY26 projections, but officials cautioned that corporate tax weakness and potential federal funding cuts leave risks to next years budget.
Treasury officials told the New Jersey legislative budget committee that April tax filings produced a material upward revision to this years revenue estimate but that federal funding uncertainty and trade risks temper the outlook.
"We now project $55.3 billion for the current fiscal year," the treasurer said, summarizing the May revenue update and noting the department raised the FY25 forecast by about $388.5 million and the FY26 forecast by about $323.2 million.
The upward revision is driven largely by stronger collections from the gross income tax and the pass-through business alternative income tax (PTBA). Treasury said PTBA performance accounted for roughly 90% of the difference between Treasury and the Office of Legislative Services (OLS) in recent forecasts, reflecting higher-than-expected estimated and final payments in April. Treasury increased its PTBA forecast by $461.3 million for FY25 and $306.6 million for FY26.
At the same time, corporate business tax (CBT) receipts fell short of expectations. Treasury reduced its CBT forecast by roughly $508.5 million in FY25 and $165.6 million in FY26, citing greater use of prior net operating losses (PNOLs) following the 2023 omnibus CBT reform (PL 2023, ch. 96). Officials expect that PNOL effects will taper as losses are exhausted and federal limitations apply.
Sales tax and other sources showed smaller adjustments: sales tax collections grew about 3% month-over-month in April and Treasury raised its sales tax forecast modestly. After the May update, officials said the state stands on a stronger-than-expected foundation heading into the FY26 budget cycle but urged caution.
"Given that historical patterns and the economic uncertainties looming in international trade, our GIT growth rate moderates," the treasurer said, emphasizing that unusually strong gains in a single year can be followed by declines.
Treasury also flagged the possibility of multi-billion-dollar federal funding cuts that could create sizeable gaps in the state budget. The department reported a projected surplus of about $6.7 billion after the May revisions, or roughly 11% of the budget, and said that maintaining a substantial surplus is fiscally prudent amid those risks.
On debt, the treasurer noted savings tied to COVID-era bond transactions and described an arbitrage payment review due in November under federal rules; the office reported net present value savings in prior transactions and said COVID bond financing produced measurable interest savings overall.
The committee asked several technical follow-ups, and Treasury agreed to provide additional written tables and data through the chair, including detailed revenue tables and supporting forecasts.
Next steps: Treasury will forward the revenue tables and follow-up numbers requested by committee members as the Legislature finalizes the FY26 appropriations.
