Treasurer Muoio Testifies Before Assembly Budget Committee on Treasury's Departmental Operations
More Detailed Revenue Update to Come in June After Tax Payments, Delayed by Filing Deadline Extension, have been Processed
TRENTON — State Treasurer Elizabeth Maher Muoio testified before the Assembly Budget and Appropriations Committee today, providing an update on the Department of the Treasury's departmental operations, with a brief update on the state's revenue situation. Due to the extension of the tax filing deadline to May 17, a more detailed revenue update will be provided in the first half of June after the bulk of payments have been processed. Below is the Treasurer's testimony, as prepared for delivery.
ASSEMBLY BUDGET & APPROPRIATIONS COMMITTEE HEARING
State Treasurer Elizabeth Maher Muoio
Testimony as Prepared for Delivery
May 17, 2021
Good afternoon Chairwoman Pintor Marin, Vice Chair Burzichelli, and members of the committee.
Thank you for the opportunity to come before you today to both discuss the Department of the Treasury's budget for Fiscal Year 2022 and provide a brief, preliminary revenue update.
I would like to introduce my senior management team who are responsible for oversight of our 13 divisions – Deputy Treasurer Catherine Brennan, Chief of Staff Jo-Ann Povia, Assistant Treasurers Dini Ajmani and Jennifer Keyes-Maloney, Director of Communications Jennifer Sciortino, and Director of Legislative Affairs Andrea Spalla.
I am also proud to be joined here today by directors and representatives from all of Treasury's divisions, including, on site here today, Martin Poethke of the Office of Revenue and Economic Analysis, and Office of Management and Budget Acting Director Lynn Azarchi and Deputy Director Tariq Shabazz.
During normal budget years, my testimony at this hearing would include a list of accomplishments achieved as the department carried out its core missions during the year. But this was not a normal year.
Like our sister departments, not only did Treasury managers and employees rise to the challenge of serving the public under unprecedented circumstances, many of them did so while taking on additional work and obligations associated with the pandemic response.
As a department that serves the public and also supports a multitude of other agencies, much of our work is carried out behind the scenes and goes unnoticed.
I would be remiss I didn't take this time to share a few examples of Treasury's contribution to the State's response to the COVID-19 pandemic.
At the onset of the pandemic, we brought division directors and our leadership team together on a daily basis to get a handle on how the public health crisis was quickly turning into an economic one and what the repercussions would be for the state.
The basic question we faced as a Department was two-fold: how do we keep State government fiscally sound and how do we maintain our own Treasury operations?
The work we do at Treasury is about more than numbers.
Our department is essentially divided into two general, and sometimes overlapping, categories: finance and operations.
When the pandemic emergency hit our state, while our financial team went to work number crunching, we put together an ad hoc Pandemic Response Committee to:
- develop employee and public communications,
- ready our facilities to accommodate our essential on-site work,
- deploy technology resources to enable productive remote work,
- and develop innovative solutions to open and maintain our public facing operations as safely and efficiently as possible.
The response by our divisions throughout this crisis has been truly extraordinary.
Over the past 14 months, the Division of Property Management and Construction (DPMC) has provided a variety of critical COVID-19 related services to departments and agencies throughout the State.
This included negotiating license agreements to establish Field Medical Stations and a State mortuary to address the volume of COVID-related deaths in the State, and for the operation of three regional vaccination mega-sites.
DPMC's health officers established protocols for COVID-related cleanings, along with a reporting system for agencies to initiate specialized cleanings in all Treasury-managed and leased buildings occupied by various departments and agencies around the State.
In addition to coordinating nearly 2,400 cleanings, this small unit provided services and guidance to Treasury and other departments regarding the modification of work and public areas, including installing Plexiglas barriers, creating and posting safety signage, providing sanitization supplies, conducting courtesy inspections, and assisting agencies in every part of the state, from Warren to Salem Counties.
Under the guidance of our Division of Purchase and Property (DPP), the Distribution and Support Services (DSS) staff works year-round to distribute essential food, food services, and janitorial supplies each day to State hospitals and correctional facilities.
During the COVID-19 pandemic, DSS went above and beyond to ensure that State facilities had the critical supplies they need, including the delivery of medical supplies to field medical facilities throughout New Jersey.
To reduce the chances of the State being subjected to fraudulent procurement activities, DPP's Business Analytics staff were a first stop in vetting over 3,000 vendors offering to sell PPE products to the State, reviewing and researching these vendors, before submission to NJOEM for additional review.
DPP's Waiver Review Unit worked tirelessly to quickly review and approve over 100 requests by State agencies to purchase, through an expedited waiver process, nearly $1 billion in COVID-related goods and services, including ventilators and PPE; as well as supplies for COVID testing, contract tracing, and vaccine information and distribution.
In light of the disparate impact COVID 19 has had on communities of color, the mission of the Office of Diversity and Inclusion (ODI) has never been more critical.
The ODI held a successful virtual Minority, Women and Veteran-Owned Business Summit for 1,200 attendees in December 2020, in partnership with the NJ Economic Development Authority and the NJ Supplier Diversity Development Council, which was focused on presenting real contract opportunities to diverse suppliers.
In addition, the Chief Diversity Officer served as a member of the state Contact Tracing Task Force and participated as a member of the Review Committee for the multi-million dollar Contact Tracing Marketing RFQ Solicitation, while also serving as contract manager for our statewide Disparity Study, currently underway.
ODI has also been tasked with tracking the use of Minority, Women, and Veteran-Owned Businesses for contracts and purchases during the pandemic.
At our Division of Administration, Treasury's Emergency Response Unit Manager and procurement specialists were deployed to NJOEM to perform critical services and provide both State and county emergency response teams with the resources they needed.
Essential workers at our Capitol Post Office, Printing Services, Transportation Services, Facilities Management, and Building and Construction offices continued to carry out their duties, meeting the needs of the State agencies that rely on them to serve our residents.
Our Division of Pensions and Benefits team played an integral and particularly difficult role in this crisis.
Many public employees and their dependents are serving on the front lines right now – from state, county, and local government employees, to police and firefighters, teachers, and more.
Making sure they have access to COVID testing and other necessary resources was a crucial component of our State's success in combating this crisis.
The benefits side of this division worked hard early on to make sure that our public employees in the State and School Employees Health Benefits Programs had health care coverage for the new, emergent needs they faced.
Staff across the Division banded together to help public employees deal with the anxieties so many of us grappled with during the height of the pandemic, while ensuring uninterrupted access to critical services and benefits throughout the public health emergency, often via non-traditional means, including the robust use of telemedicine options.
Division staff also guided our clients during the most difficult and stressful situations, including an unprecedented influx of devastated clients calling about the death of a loved one from COVID.
Our team frequently handled consecutive calls like this.
As you can imagine, this was extraordinarily difficult, but like all of our divisions, Pensions and Benefits staff handled these situations with empathy and professionalism.
I know all of you understand the important role the New Jersey Lottery plays when it comes to supporting our pension system and our overall financial position.
Thanks to advanced planning and compliance with COVID protocols for the safety of both employees and vendors, the Lottery team has continued to seamlessly operate throughout the pandemic, conducting over 750 mid-day and evening draws since April 1, 2020.
Our Division of Taxation has also worked overtime to adapt to the changes wrought by the pandemic.
In addition to providing comprehensive guidance on its website for individual and business taxpayers related to the numerous COVID-19-inspired tax changes, Taxation successfully reopened the Trenton walk-in Regional Information Center during the COVID-19 pandemic to assist taxpayers on an appointment basis.
They also created an app that pre-screened constituents based on their reason for requesting an in-person visit in order to determine if their service could be handled via the web, phone, or teleconference, eliminating 94% of the requests for onsite visits.
Importantly, approximately 100 Taxation employees also provided assistance to the Department of Labor and Workforce Development to assist our sister agency in processing the historic level of unemployment insurance claims during the height of the pandemic.
Through the innovative use of online services the Division of Revenue and Enterprise Services, better known as DORES, overcame the challenges posed by the pandemic to keep vital services flowing to our residents and business community.
This included:
- recording an all-time record of 140,886 new business entity formations in 2020;
- certifying nearly 3,000 small, minority, women, veteran and disabled veteran-owned business enterprises; and
- processing $44.6 billion in revenue receipts.
Equally important, DORES established a remote access platform, enabling over 2,800 Treasury employees to work safely, securely, and productively from home and alternate work sites.
Our Office of Management and Budget – or OMB as you are all very familiar with – demonstrated extraordinary fortitude over the past year, successfully producing four budgets in a 12 month period, while simultaneously completing the Comprehensive Annual Financial Report, the federal Single Audit, and the year-end closing processes for both payroll and the Cash Flow Spreadsheet.
Our Office of Public Finance saved the State – and taxpayers – significant money by taking advantage of historically low interest rates to efficiently fund the State's capital needs and refinance State debt, including $384 million in savings through the refunding of Transportation Trust Fund Authority bonds.
Public Finance also worked with Loop Capital Markets to issue $350 million of School Facilities Construction Bonds.
Loop was not only the first minority-owned firm to senior manage a State transaction of this magnitude since 2005, it also introduced the State's first ESG – Environmental, Social, and Governance - bonds for school construction.
Our Division of Investments also managed extraordinary challenges this past year, namely the volatility of the stock market.
They oversaw the management of roughly $80 billion in pension assets through a bear market that recorded its worst single-day points-drop ever, to the eventual return of a bull market, to today – where on a fiscal year-to-date basis through April 30, the Pension Fund's preliminary return is up 22.6% and our assets have grown to an estimated $90 billion.
Throughout all this, the Division also added diversity- and sustainability-focused leadership with the hiring of our first Diversity Portfolio Manager and the creation of a Sustainable Investing Portfolio Manager, and expanded the senior management team with key hires including the first Chief Operating Investment Officer, the Head of Fixed Income, and the Head of Real Assets.
Finally, when it comes to volatility, few offices have more firsthand experience than our Office of Revenue and Economic Analysis – or OREA – which has had to analyze national economic forecasts that changed with unprecedented speed and scope and adapt our revenue projections accordingly during the unchartered territory presented by the global pandemic.
This brings me to our current economic and tax revenue outlook, which I am happy to report is looking positive and continues to improve.
As I noted when I appeared before you in April, federal stimulus dollars have been a game-changer thanks to historically unprecedented levels of support for individuals and businesses.
In 2020, government benefits soared by a remarkable 37 percent, offsetting flat wage growth so that personal income jumped by 6.1 percent, the highest national growth rate in a decade.
Thanks to the ARP stimulus payments that were delivered this spring, retail sales in the U.S. grew 9.8 percent month-over-month this past March, which was 27.7 percent higher than the prior year.
New Jersey data is expected to continue tracking very closely with the national trends.
The New Jersey housing market also continues to perform well, with single-family home sales in March 20.9 percent higher year-over-year.
As the State enters the peak home-buying season, new listings this past March were 8.5 percent higher, year-over-year, and pending sales were 37.9 percent higher.
Job growth in New Jersey is also picking up speed, with the labor market adding 20,800 jobs in March.
Non-farm payroll employment has increased by a total of 31,600 jobs over the past two months after only adding 5,200 jobs over a four-month period from October 2020 to January 2021.
The New Jersey labor market has now recovered 53.7 percent of the jobs that were lost in March and April 2020, and progress will continue to be made, chipping away at the 332,300 payroll jobs that were lost since the pre-pandemic peak in February 2020.
As a result of the consumer spending surge, revenues like the Sales Tax and Realty Transfer Fees are soaring.
Year-to-date Sales Tax collections are up 9.0 percent and Realty Transfer Fee collections are up 26.3 percent over the same 10 months last year.
While comparisons to the pandemic recession levels of last spring will be misleading, these consumer-driven revenues are also well above pre-pandemic levels from two years ago.
April Sales Tax collections were up 23 percent from the pre-pandemic levels of April 2019.
That's roughly 11 percent growth per year for a revenue that historically averages between 3-4 percent annual growth. April Realty Transfer Fee collections were 75 percent above the pre-pandemic level of two years ago.
In early June, Treasury will release a full set of updated Fiscal Year 2021 and 2022 revenue forecasts after having time to process the Gross Income Tax (GIT) payments from the important extended May 17 tax filing deadline.
Due to the extension of the filing deadline, final April income tax payments were about $2.0 billion below the normal, pre-pandemic level - $752 million in 2021 versus $1.772 billion in 2019.
We expect most of that difference to be made up by early June once the final returns are processed.
The interaction between the GIT collections, CBT collections, and the new Pass-Through Business Alternative Tax (PT-BAIT) payments and credits is also under review as tax returns come in.
However, Treasury is confident that the overall revenue forecasts will increase by hundreds of millions of dollars due to the federally-induced surge in consumer spending.
Our Sales Tax forecast, for example, is likely to rise by at least several hundred million in FY2021 alone.
So, all in all, the revenue outlook for the remainder of the current fiscal year and going into FY22 is positive and improving.
We should all take encouragement in how far we've come in the past 12 months.
Thanks to the administration's continued commitment to ensuring more and more New Jerseyans receive the vaccine, and the ongoing rollback of COVID-related restrictions, that light at the end of the tunnel continues to grow brighter.
I for one am comforted by the fortitude and dedication I have witnessed from our public employees, both at Treasury and throughout the state during this unprecedented crisis.
Across all branches of State government, our workers who clocked in every day, either at their office or from their kitchen table, truly responded to the call of public service - many of them carrying the extra burden of caring for loved ones or remote-schooling their children as they carried out their duties.
I could not be more proud of our team.
State workers met these challenges with professionalism, and ensured that uninterrupted services continued despite the many personal challenges the pandemic created in their own lives.
I'm sure all of you are as grateful for, and proud of, the women and men of your staff, as I am of mine.
I thank them all for their service.
I am happy to take your questions.
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