Gov. Phil Murphy’s second ever budget proposes roughly $1.1 billion in savings and calls for an end-of-the-year surplus of $1.16 billion – both figures being the highest called for in years for the state budget.
Roughly $800 million of those savings are through public worker health care costs, while $212 million would be through spending-cuts individual departments could make.
At least $200 million of the health care savings will be through a recently negotiated contract between the state and several public worker unions, including the Communications Workers of America – which represents thousands of state workers – that will run through 2023.
Among the other $600 million, the state found savings in areas such as more effective procurement procedures for health care providers and out-of-network coverage. The budget also calls for shaving off the number of state employees, which last year stood at 64,046 workers.
The plan does run shy of one item backed by Senate President Stephen Sweeney’s, D-3rd District, Economic and Fiscal Policy Working Group unveiled last summer, which calls for a series of policy proposals on how to lower property taxes and reduce the state’s pension and health care obligations.
One plan calls for shifting many public health plans from the equivalent of platinum-level coverage under the Affordable Care Act to a gold level of health coverage.
Another proposal from Sweeney’s group calls for shifting the retirement plans of workers who worked for the state for less than five years from a full pension plan to a 401k-style retirement plan.
Last summer, the Murphy administration and the New Jersey Education Association – the state’s largest teachers union – struck a deal to shave off roughly half a billion dollars in health care costs over the next two years.
Then the Murphy administration unveiled a report last December that called for installing a third party administrator to scrutinize health care claims in real time and shave off potentially wasteful expenses.
That came to the support of lawmakers, such as Senate Budget Chair Paul Sarlo, D-36th District, who has already sponsored Senate Bill 3042 to establish such an apparatus within state government.
All told, Murphy’s budget would result in the highest surplus at least since the 2009 fiscal year, when it came in at $934.1 million.
The 2019 budget would come in at nearly $1.1 billion surplus, despite projections of slow economic growth.
Senior administration officials downgraded how much the state expects to make on the gross income tax – from nearly $16 billion down to $15.6 billion or $415 million less – and the sales and use tax – from $10.1 billion to $10.5 billion or $79 million less.
That means that the revised growth rate for the state economy was nudged down from 6.2 percent to 4.6 percent, as income tax collection for the state has so far lagged.
The slow growth had analysts such as S&P Global Ratings worried about the state’s economy.
Republican lawmakers and business advocates, critical of what the governor’s “tax and spend” approach” was, said the slow growth was a sign that tax increases were the wrong direction for the state.
State Treasurer Elizabeth Maher Muoio attributed the slow growth to the timeline at which people filed their taxes in response to the 2017 federal tax cuts. The number will “correct” itself in April, Muoio said.
The silver lining is the increase in corporate business tax, which is projected to earn the state $3.7 billion – up $662 million from the $3.05 billion lawmakers agreed upon when Murphy signed the budget last July.
Under the corporate business tax, pushed through by Sweeney, the state would increase the CBT rate by 2.5 percent for two years and then 1.5 percent for another two years. The increase makes New Jersey’s CBT rate the second-highest in the country.
However, the 2020 budget calls for scaling down projections by $491 million to $3.2 billion.
Muoio said that was because of a slew of “one-shot” revenue sources. Those included $200 million from the repatriation fee, which was a one-time tax on money that companies brought back into New Jersey following the 2017 federal tax cuts.
Other one-time sources included $81.8 million from the tax amnesty program, which allowed taxpayers to who did not pay taxes owed between 2009 and 2017 a two-month window to pay them back with reduced interest and no penalties.
The program brought in $282 million, which in addition to the CBT, brought in $104.4 million from the sales and use tax, $67.7 million from the gross income tax, $15.5 million from the estate tax and $9.9 million from the petroleum products gross receipts tax.
Murphy last year was highly critical of one-time revenue sources for the budget, calling them “one-shot gimmicks.”