Gov. Phil Murphy’s budget calls for setting aside $400 million toward a series of five new economic incentive programs, aimed at replacing the Christie-era Grow New Jersey tax breaks and the Economic Redevelopment and Growth gap financing program, both of which end in July.
Murphy’s proposal comes at the heels of an oft-cited January audit from the state comptroller’s office detailing how the Economic Development Authority – tasked with administering the tax credits – had little oversight of $11 billion of tax breaks it awarded between 2005 and 2017, making it hard for state officials to determine if tax credit recipients actually delivered on promise economic activity.
“We can provide strategic incentives without hurting our ability to reinvest in the things that bolster our economy and help our businesses,” Murphy said Tuesday at his budget address for the 2020 spending plan. The current fiscal year ends June 30, which is the deadline for lawmakers to agree on a new budget.
“Tax incentives, transparent and accountable, smartly devised and strategically deployed, have a vital role to play in a focused economic growth plan,” Murphy added.
NJ Forward, which would replace Grow NJ, would be capped at $200 million. NJ Aspire, which would replace ERG, would be capped at $100 million.
An expanded Brownfields Redevelopment program, aimed at financing redevelopment of contaminated urban sites, and a historic preservation tax credit program, would each be capped at $20 million a year.
Lastly, the governor unveiled a $500 million “Innovation Evergreen Fund,” capped at $60 million a year, in which the state would split investments 50/50 with venture capitalists to fund life sciences, financial technology, digital media and cybersecurity startups looking to open up shop in the state.
New Jersey will have to begin spending $1 billion annually starting this July to finance the tax breaks, according to budget data.
“The potential impact of past corporate tax breaks on corporate business tax collection, in the coming fiscal year, surpasses $1 billion. And, it will remain over $1 billion annually for at least the next three fiscal years,” Murphy said.
“The simple fact is that we are currently obligated – I repeat, obligated – to corporate tax breaks totaling $11 billion through at least Fiscal Year 2031,” he added.