Stopgap NJ Budget Advances, Delaying Painful Choices Until Fall
TRENTON — The Legislature is moving to approve $7.7 billion in spending for what amounts to an unprecedented fifth quarter of its fiscal 2020 budget, a stopgap measure that puts off until September the difficult decisions of how to balance the books following the coronavirus pandemic.
The Assembly Budget Committee voted on party lines Thursday to advance the bill, A3/S20, which adds $114 million in supplemental spending for the current 12-month budget and $7.6 billion more in state funds for the months of July, August and September.
The Senate budget committee is expected to approve it Friday, followed by the full Senate and Assembly on Monday – at their first voting sessions at the Statehouse since March after months of meetings done by phone and online through Zoom.
Gov. Phil Murphy's administration forecasts the state will raise $9 billion less in tax collections between 2020 and 2021 than it anticipated in February – $10 billion if you remove the tax and fee increases he had proposed.
He plans to mostly drain the state's surplus and rainy day fund, de-appropriate $1.3 billion in previously approved spending, withdraw $850 million in planned spending increases and cut or defer until October another $3.2 billion.
Assemblywoman Eliana Pintor Marin, D-Essex, who chairs the budget committee, said it’s going to be a long summer.
“A lot of the things that have been poised for us to potentially cut are items that have been near and dear to all of our hearts, are things that we throughout the years have tried to protect because they’re good things,” Pintor Marin said.
“This is a budget, a closing out of a budget, that’s tough right now, and I think unfortunately for Oct. 1, it’s going to be worse,” she said.
“This is simply an unprecedented time for all of us. This is as painful as it can be,” said Assemblyman John Burzichelli, D-Gloucester, who heads the appropriations committee. “But as the chairwoman said, what’s coming at us as we start to negotiate the nine months will likely be even more difficult.”
“In these extraordinary times, this bill does what we need to do without doing things that are going to hurt the economy while at the same time providing some flexibility and a process so that if things look better in July with our revenue or as we get into October, there’s ways here to take a different path,” said Assemblyman Dan Benson, D-Mercer.
Though it contains no tax increases or borrowing for operating expenses, all Republicans on the Assembly Budget Committee voted against the bill, in part because they only received the 109-page proposal Thursday morning.
“First items that are wiped out is the Senior Freeze and the homestead rebate, which helps the most vulnerable in our society,” said Assemblyman Hal Wirths, R-Sussex. “That is going to be just like a tax increase to them.”
Pintor Marin said items that aren’t funded in the short-term budget could return in the fiscal 2021 budget due by Oct. 1 though didn’t seem optimistic. She said Murphy has frozen or deferred $5 billion in spending.
“Whether some of these items might be restored for the Oct. 1, or it’s just a moment in time where we can pause this to regroup and see where our fiscal situation ends up in another month or two,” Pintor Marin said.
“Obviously you touched on two programs that are important to all of us here,” she said. “I think that until we better understand what we really are looking at, we’re going to have to unfortunately make tough decisions right now. And Assemblyman, unfortunately we’re going to have to make even tougher decisions come Oct. 1.”
Assemblywoman Nancy Munoz, R-Union, asked whether the Murphy administration had discussed asking every department to cut its budget by 5%.
No one from the Treasury Department testified at the hearing, though five weeks ago the state Department of the Treasury told the Legislature its short-term budget reduces non-salary operating spending across the board by 5%, saving $9.7 million, and statewide discretionary grants by 10%, saving $28.3 million.
Assemblywoman Serena DiMaso, R-Monmouth, said the revised contract agreement between the Murphy administration and the largest state workers’ union, the Communications Workers of America, doesn’t do enough to save the state money.
An actual savings amount hasn’t yet been detailed. If the deal is ratified, an estimated 25,000 nonessential CWA workers will be furloughed for two weeks in July – during which they can receive regular unemployment benefits and the extra $600 a week in federal benefits through the CARES Act – and won’t be paid for furloughs on the day after Thanksgiving and Presidents Day next February.
A 2% cost-of-living raise due to take effect July 1 will be delayed 17 months to December 2021, and another 2% increase due to be paid in April 2022 will be delayed three months. In exchange, the CWA says, Murphy agreed no CWA members can be laid off from their jobs before Dec. 31, 2021.
“No matter what happens with the economy. Our members are safe,” the CWA said in a memo to its members, adding that the agreement will save thousands of jobs.
“How do we reform government, cut spending, save taxes for our taxpayers who are really getting hit hard if there’s no way to rearrange programming and services, based off what I’m hearing of no layoffs for two years?” DiMaso said.
“It seems to me that pretty much everything is on the chopping block except for the public unions,” DiMaso said.
The three-month plan includes too many spending deferrals and not enough cuts, said Christopher Emigholz, vice president of government affairs for the New Jersey Business and Industry Association. He said the furlough agreement with the CWA is welcome but that it only defers cost-of-living raises without touching step increments.
“It is furloughing some employees. We wish that was done months ago," Emigholz said. "We do believe the governor’s call for shared sacrifice, and we just hope that the shared sacrifice includes everybody. Businesses have sacrificed. Taxpayers have sacrificed. We want to make sure that government cuts and right-sizing government programs is part of that sacrifice as well.”
Emigholz said solutions for balancing the upcoming nine-month budget should include federal aid, savings from health benefits and pensions for public workers, a small amount of borrowing and, as a last resort, tax increases. He said the state should make sure it collects the income taxes it should be due from New Jersey residents who’ve been working from home, rather than New York, since March.
“Tax increases we hope are never part of the solution, but we do understand that they may be,” he said.