2006 New Jersey State Government Shutdown - Effects

Effects

During the casino shutdown, 36,000 casino workers were given leave. The shutdown of casinos resulted in lost revenue for the state, as an estimated $1.3 million per day was collected in gambling taxes plus an additional $2 million per day due to the closure of the lottery system. However, the sum of revenue not collected during the shutdown from gambling amounted to just a small fraction of the state's annual budget. Atlantic City's 12 casinos suffered losses estimated at $16–20 million per day during the shutdown. Revenue losses to lottery vendors and casino employees have not been calculated. Legislation signed by Governor Corzine in June 2008 would keep casinos and racetracks open in the event of a future budget showdown, with the Governor noting that the casino industry is vital to the New Jersey economy and that it should not operate under the threat of closure as it did in 2006.

All driver's licenses and vehicle registrations that were to expire at the end of July were extended one month.

The increase in the rate of the state sales tax from 6% to 7% took effect on July 15, 2006, and also increased the sales tax rate in the state's Urban Enterprise Zones (UEZs) from 3% to 3.5%. A significant change was made in the payment of sales taxes by businesses operating in the UEZs in that they would be required to pay the entire amount of the full tax rate to the state on all appropriate purchases, and wait for the state to rebate them the difference.

The budget also included changes to products and services that are subject to the sales tax, effective October 1, 2006. The newly taxable items included downloaded music, ringtones, movies and books; shipping and handling; drapery and carpet dry cleaning; floor installation; contracted landscaping; self-storage; tanning; massages; tattooing; magazines; investigation and security services such as armored cars and alarm systems; limousines, except for those used in funerals; memberships in health, athletic and shopping clubs; and parking, except for employee parking, parking at municipal meters and parking already subject to municipal parking taxes.

Other immediate tax increases in the budget included an increase in the cigarette tax by $0.175 per pack; a 0.4% surcharge on automobile purchases of over $45,000.00 and on vehicles with an average combined city highway miles per gallon 19 or less; a new 6% tax on fur clothing; an increase in the rental-car tax from $2 to $5 per day; and increases on several business taxes.

These additional revenues were expected, when combined with spending cuts including a reduction of $200 million in higher education spending, to meet the state's balanced-budget requirement. A clause was also inserted into the budget cutting state aid for schools that hold over $1 billion in endowments. The only school in New Jersey that fell into this category was Princeton University, which had an endowment with assets over $11 billion in 2006. The university that had the largest endowment next to Princeton at the time was Drew University which had a $225 million endowment fund.