The New Jersey Civil Service Commission began allowing public workers to take part in voluntary furloughs, as the state scrambles to avoid layoffs and balance a budget that has seen billions of dollars evaporate amid a global pandemic and recession.
Under the voluntary furlough program, rolled out Thursday, the state would still pay for worker’s health benefits.
The new scheme largely mirrors a bill put forward by Senate President Stephen Sweeney, D-3rd District, and sent to Gov. Phil Murphy’s desk on May 14, but Murphy’s office and the governor would not, at his Friday afternoon COVID-19 press briefing in Trenton, comment on the measure.
Sweeney’s plan calls for up to 100,000 state and local workers – a quarter of the public workforce – to undergo partial furloughs, so that the state’s unemployment system would cover part of their income, and their employer would still pay for health and retirement benefits. He argued that it could save roughly $750 million in the next three months.
New Jersey is slated to see a $10 billion hole in its tax revenue through the end of June 2021, according to the most recent projections from the state treasury. That’s still far less than the $30 billion budget shortfall which Gov. Phil Murphy warned about only weeks earlier.
But the governor, at his daily COVID-19 press briefing Friday afternoon, said that the discrepancy was because of the “dramatic amount of expenditures on [personal protective equipment], medication, ventilators, beds.”
He warned that the state would have to initiate “historic” lay-offs and cuts to public services, and argued that federal aid would be paramount to avoiding such a scenario.
Responses to the outbreak from Murphy and other governors nationwide have entailed placing their respective states on near-total lockdown and closing businesses en masse. The move has shown many signs of working, but in the process has ground commerce to a halt—driving up unemployment and causing major slashes in the taxes on which the state relies: corporation, income, sales, gas, casino and lottery sales, as well as fares and tolls.
The state treasury already froze $920 million of spending through June 30, and on Friday State Treasurer Elizabeth Maher Muoio said that most of those programs were among $1.3 billion of state spending that had been “de-appropriated.”
Of the revenue shortfall, a $2.75 billion hole is expected through the end of the budget, now extended to Sept. 30, so that the administration can gather more tax filings submitted by the extended July 15 deadline.
Looking ahead through the end of June 2021, which would encompass the 2021 fiscal year for the state, New Jersey can expect a $7.3 billion shortfall.
That does not take into account a widely-expected second wave of COVID-19 later this year, which Murphy said could shave off another $1 billion of tax revenue.
Muoio is slated to release an in-depth revenue report to the public later in the afternoon on Friday, and already provided those numbers to the state Legislature, according to Murphy.
Murphy indicated Friday that there would be no tax increases through Sept. 30, but would not say whether the same would be true for the following budget year.
To cover short-term losses, the governor said he wants the state to borrow at least $5 billion under a Federal Reserve program meant to shore up the finances of state and local governments in situations similar to New Jersey.
Sweeney, a frequent opponent of the tax increases proposed by the governor, said that for the coming budget those types of proposals could not be taken off the table.
“Nothing is off the table, because it can’t be off the table because we’re in unprecedented times,” Sweeney, said in an hour-long editorial board meeting with NJBIZ.