By Hilary Russ
TRENTON, New Jersey (Reuters) - The New Jersey Senate budget committee approved on Thursday a $31.7 billion budget for fiscal year 2013 that pegs a tax cut to an improvement in the state's revenue collections.
"I believe as New Jersey's economy continues to grow ... we should return money to the taxpayers," state Senator Paul Sarlo, chair of the budget committee, said during the hearing.
Over the past couple of weeks, the Democratic-led legislature has been negotiating with Republicans over the budget and possible tax cuts.
In February, Republican Governor Chris Christie proposed a 10 percent across-the-board income tax cut to be phased in over the next three years.
State Senate President Stephen Sweeney called instead for New Jersey families earning less than $250,000 to receive a 10 percent income-tax credit on their property taxes over four years.
The budget legislation advanced on Thursday includes Sweeney's tax cut plan - with the provision that the $183 million that would be needed for the tax cut in fiscal 2013 would be set aside until revenue collections improve. Lawmakers did not specify the amount of revenue improvement they sought, but a spokesman for Senate Democrats said 6 or 7 percent growth in revenue collections was targeted.
Christie said in a statement the Democrats' budget proposal was "sending a loud, resounding no to tax relief." A spokesman could not immediately be reached to say whether Christie would veto the legislation.
Republican senators said they would not support the budget proposal because it in effect put off a tax cut that they say has been sorely needed for years.
The state Assembly's budget committee is expected to approve the legislation on Friday, although it could make changes. The bill would go to a full Senate vote on Monday, when senators could make amendments from the floor of the chamber.
By some measures, the state's recovery from the recession has been sluggish. Its unemployment rate, which stood at 9.2 percent in May, lags behind the rest of the country.
Revenue has also come in short of where Christie, who has been touting a New Jersey "comeback," had projected.
In May, his administration said the state could come in $676 million short for fiscal years 2012 and 2013 combined. But the legislature's chief budget officer, David Rosen, said the gap could be $1.3 billion - or nearly double Christie's estimate.
Also advancing out of the Assembly's budget committee on Thursday was a proposal to issue up to about $1.25 billion of bonds annually through 2016 for the New Jersey Transportation Trust Fund Authority.
Lawmakers are also considering a bill for least $750 million in bonds for capital improvements to higher education facilities.
(Reporting by Hilary Russ, Editing by Tiziana Barghini and Peter Cooney)