Murphy signs COVID-hit $32.7B budget

The governor approved a record-high state spending plan on Tuesday after it sailed through the Legislature at breakneck speed over the past week.

Under this new budget, New Jersey will spend $32.7 billion on a variety of expenses between Oct. 1 and June 30, 2021, to keep the lights on.

The Fiscal Year 2021 budget would have began on July 1, 2020, but Gov. Phil Murphy and the state Legislature agreed to push back the start date to account for a three-month extension of state and federal tax filing deadlines, as COVID-19 began to wreck the economy both in New Jersey and across the nation.

“We crafted this budget as we fought this pandemic—together. This is the ultimate walk-and-chew-gum moment, and we rose to meet it,” the governor said at the Tuesday afternoon budget signing ceremony at the Trenton War Memorial Theater.

“To be sure, not everything I or the Legislature proposed was written into this budget. That’s the way the budget process works. It is a give-and-take.”

Combined with the $7.7 billion “stopgap” budget that covered between July 1 and Sept. 30 of this year, the 12-month spending plan calls for a record-high $40 billion of expenses.

Murphy and lawmakers have argued that a variety of the spending proposals are necessary to set the stage for the state’s economic recovery coming out of the global pandemic.

“As we continue to fight this pandemic, this budget will provide the resources we and our residents will need build a stronger, fairer, and more resilient future,” Murphy said on Tuesday.

As COVID-19 swept across New Jersey in early March, the governor ordered the shutdown en masse of sit down dining, gyms, non-essential retail, nail and hair salons, malls, casinos and theaters, all to stomp out the spread of the virus. In the process, that ushered in the worst economic conditions since the Great Depression, and record-high unemployment. Income, sales and corporate business taxes all cratered.

The budget relies on $4.5 billion of new debt, which is going forward without voter approval. A four-person, special legislative committee approved the borrowing on Monday after less than 20 minutes of deliberation, and testimony against it by three of the state’s largest business trade groups.

“We’re hopeful that the revenues figures are strong, that the amount of money from Washington will come and allow us to minimize the amount we borrow,” Assembly Speaker Craig Coughlin, D-19th District and one of the committee’s four members, said on Monday.

“In my mind’s eye, I see this more as a line of credit than as a mortgage,” Coughlin added that same day. “But I think we need to be prepared. We don’t know what the future holds.”

The budget includes an assortment of taxes: A hike on the millionaire’s tax, the extension of the increased business tax on New Jersey’s highest-earning corporations, and a higher HMO assessment on health plans.

Income tax rates will be raised from 8.97 percent to 10.75 percent on any income above $1 million. The 2.5 corporate business surtax – tacked on to the 9 percent that  New Jersey’s highest-earning corporations pay – will last another four years, rather than sunset to 1.5 percent.

The HMO assessment on health plans will increase from 3 to 5 percent.

Many smaller taxes Murphy wanted – on cigarettes, opioids, gun and ammunition and yacht sales, and limousine rentals – were not included in the budget.

“This budget lives up to the ideal of shared sacrifice in trying times by including meaningful tax fairness. This isn’t just achieved by reinstating the millionaire’s tax, but also by providing direct tax relief to hundreds of thousands of middle-class and working families with children,” Murphy said.

The budget calls for tax rebates of up to $500 for families that earn up to $150,000 a year beginning next summer.

Republicans decried what they saw as pet projects in the spending plan for lawmakers in Democratic legislative districts. They argued that given the dire state of the government’s finances, such levels of spending were not appropriate.

But Murphy on Sept. 25 praised the budget, saying he would sign it “as is.” Lawmakers in the Senate and Assembly budget committees approved it Sept. 22, followed by the full chambers on Sept 24.

“I think we came to the conclusion that we couldn’t cut our way out of this, and we couldn’t tax our way out of this,” Coughlin said on Tuesday. “The budget poises us, when the recovery comes, and it will, to take advantage of it, and not to be too far down, in order to come roaring back.”

Senate President Stephen Sweeney, D-3rd District, has vowed to push forward an array of wide-ranging cost-cutting measures, such as steep cuts to the pension system for current and future school and state employees, and shared services among local governments and school districts.

“We got another budget coming quick and we got a lot of tough decisions to make,” Sweeney said on Tuesday.

Democratic lawmakers disputed there was any pork-spending in the plan, contending that every dollar spent was for necessary services.

“This is also a budget that has certain priorities in here that really work toward some social justice impacts as well, and making sure that people that are in underserved areas are exposed to things they wouldn’t normally be doing,” Assembly Budget Chair Eliana Pintor-Marin, D-29th District, said after the Thursday Assembly voting session. “Especially at a time when kids are not going back to school, or seniors are stuck at home.”