Murphy Budget Boosts State Spending 11%, Avoids New Tax Hikes
TRENTON — Gov. Phil Murphy proposes to boost state spending by 11% in the fiscal year starting in July, in an election-year budget that avoids tax or fee increases due to stronger-than-expected revenues and a surplus helped by nearly $4.3 billion from emergency borrowing.
The proposed budget would spend $44.8 billion in state funds. That compares with $40.3 billion in the budgets adopted for the current 12-month cycle, which has since been adjusted to $41.2 billion due to $872 million in supplemental spending now being proposed.
The budget includes nearly $6.4 billion going into the public workers’ pension funds – the first time since 1996 that the state would be make the full payment recommended by actuaries. Had the state made a full payment each year, the coming year’s contribution would have been less than $800 million.
“We won’t allow New Jersey to be pulled backward. This is the time to look ahead,” Murphy said in a budget address delivered electronically, rather than in-person before a joint session of the Legislature.
“This is the time for us to lean into the policies that can fix our decades-old – or in some cases centuries-old – inequities,” he said. “It is the time for us to also lean into the economic policies that will not just get us through the remaining months of the pandemic, but which will supercharge our reemergence from it and the recovery that awaits on the other side.”
The budget blueprint proposes plenty of new spending:
- $86M for capital investments, including technology upgrades for the labor department’s unemployment system and the Motor Vehicle Commission
- Funding for the $500 tax rebate that had been promised as part of raising the millionaire’s tax
- A refundable child care credit and making seniors eligible for the earned income tax credit
- Raise the income eligibility threshold for PAAD and Senior Gold prescription assistance
- A new “Cover All Kids" health coverage initiative
- $50 million for making the first two years tuition-free at four-year colleges for families with incomes under $65,000
- $578 million more for aid through the school funding formula, though some districts still lose aid
- $200 million to help support the post-pandemic economic recovery
- $200 million for offshore wind development, to reduce the borrowing needed for a project off Lower Alloways Creek
- $75M for emergency construction in SDA school districts
Sen. Steve Oroho, R-Sussex, said the spending plans were predictable as Murphy insisted on borrowing billions of dollars despite finances that rebounded as lockdowns eased.
"Let's be perfectly clear. Governor Murphy's election-year budget is about protecting one job, his own,” Oroho said.
"His proposed budget would spend down billions in surplus, which won't be sustainable beyond a single year,” Oroho said. “If Gov. Murphy is reelected, it's an absolute certainty he'll call for tax increases next year to keep his spending spree going.”
The current budget is forecast to end with a $4.9 billion surplus and $1.4 billion in the rainy day fund. Next budget year is forecast to end with a $2.2 billion surplus – meaning nearly $4.15 billion is used to support fiscal 2022 spending.
Fares will not be increased at NJ Transit, despite that agency’s continuing financial problems due to the pandemic.
The budget envisions closing the Department of Corrections’ William H. Fauver Youth Correctional Facility in Clinton Township, formerly known as Mountainview Youth Correctional Facility, due to the reduced population of people who are incarcerated.
Murphy will have made more than $18 billion in contributions to the pension funds over four years, if the proposed contribution is included in the budget adopted in June. Murphy had pledged to reach the 100% payment in fiscal 2023 but has gotten there one year early.
“This is a big deal!” said Hetty Rosenstein, state director for the Communications Workers of America union. “For the first time in a quarter-century, New Jersey finally has a governor proposing a 100% pension payment. Phil Murphy is truly the ‘man of the hour.’”
Administration officials say that by beginning the full payment a year earlier than planned, the state will save $50 million a year off of future payments for 30 years.
The proposed budget, which extends through June 2022, does not count on any tax revenues from the sale of recreational adult-use marijuana. It does include nearly $8 million for startup costs for the new Cannabis Regulatory Commission.
The proposed budget also does not count on any revenues from the potential changes to the corporate structure of Horizon Blue Cross Blue Shield. That would involved a long regulatory process and there is not yet an application filed.
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