File Photo by Governor Phil Murphy
New Jersey should spend $ 44.8 billion on its next state budget, Governor Phil Murphy on Tuesday suggested increasing spending more than 10% year over year, with local schools, small businesses and offshore wind generation in all Areas supported should queue up for more money.
Murphy’s new state budget provides for another sharp increase in spending, this time without any new tax hikes, thanks in part to New Jersey’s expected strong economic recovery from the coronavirus pandemic.
The spending proposal would also take a big step forward in funding the long-troubled state pension system for public workers. It proposes what is considered by actuaries to be the state’s first full pension in more than two decades.
Murphy, who is now seeking a second term in the November election, has also raised funding for a new tax break initiative that he believes will provide up to $ 500 in previously promised direct payments to thousands of families in New Jersey later this year becomes.
However, none of the tax increases enacted by Murphy, a first-time Democrat, last year among the health crisis-sparked emergencies will be reversed, although prospects for long-term tax revenues are currently projected to improve.
Funding for some of the state’s most popular property tax break programs would also be kept flat – or in some cases, decreased – in the new fiscal year, according to budget documents the Murphy administration shared with reporters on Monday before the governor’s budget news.
Still on the hook for $ 4 billion in long-term debt
New Jersey taxpayers will continue to be able to repay approximately $ 4 billion of non-cancellable long-term debt (that is, the bonds cannot be prepaid or prepaid) with interest. That debt was issued last year on objections from Republicans when Murphy and other Democrats, who control both houses of the legislature, decided to sell bonds without voter approval to offset projected revenue losses that did not fully materialize.
Instead, the Murphy administration updated its revenue projections for the current fiscal year, forecasting tax revenue to grow a healthy 4% year over year in fiscal year 2022, which runs from July 2021 through June 2022, according to budget documents. The state could also get more coronavirus aid from the federal government if talks continue in Washington, DC.
It is now up to the legislature to decide what to do with the governor’s spending plan. With the budget announcement on Tuesday, a lengthy review process begins that must end before July 1st. Legislators must now either convert Murphy’s budget into a budget and pass it unchanged, or draft their own bill and send it to the governor for final review before the deadline.
This year, in addition to Murphy, all 120 legislative seats are up for election in November.
Overall, total spending would increase well over $ 4 billion, compared to the 12-month funding Murphy and lawmakers approved last year as part of the pandemic.
First full pension contribution in years
Much of the planned new spending will cover the proposed move to fully fund the state’s annual public pension. The payment, due in the fiscal year beginning July, would be $ 6.4 billion, taking into account state lottery revenue, Treasury Department officials said during a background briefing on Monday.
The state has long shunned its responsibility to pay a full pension – even in the early years of the Murphy administration – and left the New Jersey pension system as one of the worst-funded state pension plans in the country.
Since taking office in early 2018, Murphy has followed a step-by-step plan for retirement funding established by Republican predecessor Chris Christie.
As the state’s budgetary position has improved in recent months thanks to tax hikes, borrowing, and better-than-expected revenue, Murphy decided to fund the state’s first full pension contribution since 1996 a year ahead of its previously stated schedule. The annual annuity payment in the current budget is $ 4.7 billion, including lottery entries.
“We were able to get there,” said treasurer Elizabeth Maher Muoio during a briefing on Monday about the planned full payment.
“It was clearly a priority for this governor and frankly it has been an albatross around the necks of households for decades,” she said.
Sharp increase in K-12 school aid
The direct aid for K-12 schools, which is referred to as “formula aid”, is also in line with a large increase in funds. This allocation would increase by $ 578 million, according to budget documents. Funding for pre-school education would also increase under Murphy’s proposed spending plan.
Meanwhile, funding for an aid program for Main Street would also be renewed, bringing the total spending to $ 100 million for two years, administration officials said. That’s still less than what’s called for in a recent bipartisan bill in the Senate that budgeted around $ 300 million to help small businesses and nonprofits hard hit by the pandemic.
An estimated 760,000 families in New Jersey would receive direct payments from the state worth up to $ 500 later this year under a program of more than $ 300 million funded from the new budget, tax officials said.
Murphy and lawmakers promised to launch this program last year when they also signed a deal to introduce a real millionaires tax. However, the aid program was not funded immediately at the time, although the millionaire tax came into effect immediately last year.
The governor’s budget proposal envisages further expanding the state’s popular tax credit for low-wage workers. This time, the expansion would also benefit seniors without qualified relatives, administrative officials said.
However, funding for the state’s popular Senior Freeze property tax break would remain unchanged under Murphy’s budget. The budget documents also indicate that the allocation for the homestead aid program would be reduced slightly.
While the final allocations are under negotiation with lawmakers, the governor’s proposed funding of the direct property tax relief programs suggests that the income limits for Homestead benefits will again remain unchanged. The practice of using outdated tax bills to calculate benefits could also continue, meaning that Homestead benefits will once again fail to keep up with soaring New Jersey property tax bills, which hit a record high of $ 9,112 last year.
Another raid on the Clean Energy Fund
Murphy’s budget plan also sees an additional $ 82 million from the state’s Clean Energy Fund searched to aid New Jersey Transit spending. Environmentalists and other stakeholders had urged Murphy to use the state’s brighter budget outlook to end the Clean Energy Fund raids and put NJ Transit on a more secure financial footing due to the pandemic.
Government officials also said during the background briefing on Monday that NJ Transit will continue to use millions of dollars to fund its operating budget, a practice that proponents of transportation have long criticized. Funding from the New Jersey Turnpike Authority will also prop up NJ Transit’s budget, as will a $ 100 million grant from the budget’s General Fund, officials said.
In energy-related spending, the Murphy proposals include $ 200 million to develop the offshore windport, which is being developed as a clean energy project in the Delaware Bay off Salem County.
Fiscal year is slated to begin with more than $ 6 billion in budget reserves in July, but the Murphy administration plans to run down much of the reserves rather than slumping away funds for the next downturn. They defended the move as needed amid the need to boost the state economy, which continues to be marked by high unemployment amid the ongoing health crisis.
Murphy plans to maintain a surplus of nearly $ 2.2 billion through fiscal 2022, according to budget documents. These budget reserves would amount to approximately 5% of the total planned expenditure.
“But for the pandemic, this is likely not the situation we would be in,” a tax official said during the briefing on Monday.
And while New Jersey voters approved marijuana legalization in the election last year, and Murphy signed law Monday giving adults the opportunity to use marijuana for the first time in New Jersey for recreational use, no revenue is coming from it legalized cannabis was counted to offset the new budget, tax officials said.