The state budget process is picking up steam, with hearings held this week in Trenton to drill down on Gov. Phil Murphy’s proposal for Fiscal Year 2023.
Ahead of the hearings, the nonpartisan Office of Legislative Services released new forecasts that project New Jersey will add $3 billion more over the next 15 months than the Murphy administration estimates. Overall, OLS projects a $4.6 billion surplus by the end of Fiscal Year 2023.
“Broadly speaking, we think the governor’s revenue expectations are reasonable, even though, they are substantially lower than our expectations,” said David Drescher, section chief for OLS Revenue, Finance, and Appropriations.
Drescher and OLS Finance Officer Thomas Koenig presented their analysis to the Assembly Budget Committee on April 4, and to the Senate Budget Committee on April 5. The hearings and new projections come as Murphy’s $48.9 billion budget plan goes under intense review.
Budget and Appropriations Chairman state Sen. Paul Sarlo, D-36th District, is taking a deliberate approach with the projected windfall.
“The state is fortunate right now in having a substantial amount of financial resources, but we have to be cautious and prudent so we maintain our long-term fiscal health,” Sarlo said.
He also said his committee plans to get an accounting of the state’s use of federal funds, including the Coronavirus Relief Fund, the American Rescue Plan, and plans for the use of funds from the Federal Infrastructure Investment and Jobs Act.
While Koenig and Drescher stand by the better-than-expected projections, they also are preaching caution, with concerns about the long-term sustainability of these types of surpluses. Some of the main concerns from legislators included the rate of the corporate business tax, inflation, a potential recession, COVID-19, and the war in Ukraine.
Republicans, meanwhile, have criticized the administration for overspending in the record-setting budget plan.
“Despite massive record unpredicted revenues, we’re still managing to dig our structural deficit deeper because there should be no assumption that this will continue,” said state Sen. Declan O’Scanlon, R-13th District. “The administration is planning on overspending and spending down our surplus.”
State Treasurer Elizabeth Maher Muoio testified at both hearings, saying she is “very happy” with the OLS forecasts, but also believes that erring on the side of caution is warranted, especially in such a historically volatile time.
“I think we can all agree the past two years have been a rollercoaster — physically, emotionally, and fiscally — prompted by an unprecedented pandemic, unprecedented federal stimulus, and unprecedented behavior changes as the world adjusted to these seismic shifts,” she said.