Gov. Phil Murphy narrowly won reelection and now must deal with some of the biggest obstacles facing New Jersey’s economy. Taxes, NJ Transit and sluggish job growth all present problems. Murphy’s opponent, Jack Ciattarelli, campaigned on many of those issues, and nearly unseated the first-term Democrat.
Many business leaders said they felt that Murphy’s slim victory meant New Jerseyans believed he was not making enough progress on those fronts. “He never really defined his economic priorities,” said Tom Bracken, CEO of the New Jersey Chamber of Commerce. “The economy hasn’t been given as much attention.”
In the weeks leading up to the election, the governor notched several business wins, which he used as evidence that his economic agenda is paying off. The relocation of fintech giant Fiserv to Berkeley Heights — which state officials said would add 2,000 jobs — the HAX accelerator in Newark with a potential 2,500 jobs, Netflix’s interest in using the old Fort Monmouth army base as a film and TV production facility and Amazon’s plans to use office space in Jersey City were all offered as evidence of the incumbent’s success.
Ciattarelli countered that the state had been picking winners by putting up so much cash in subsidies to lure in these companies.
Job growth in New Jersey since the pandemic has lagged, and the Garden State still has one of the nation’s highest unemployment rates. During the worst of the COVID-19 shutdowns in March and April 2020, the state’s workforce lost 720,000 jobs, many of them in retail, leisure and hospitality.
The jobless rate, which was below the national average before the pandemic, exploded to a record-high 16.6% in April last year, and has remained above 7% in 2021.
Perhaps paradoxically, Labor shortages continue to plague the state and the nation ahead of the 2021 holiday retail season. Murphy earlier this fall unveiled a series of state subsidies to help alleviate the shortage: $500 in a back-to-work bonus and $10,000 that the state will pay for training wages for someone looking to switch career paths.
‘No new taxes’
During the first gubernatorial debate, Murphy vowed not to raise taxes over his second term – a tall order at a time of economic uncertainty. New Jersey is widely regarded as having some of the highest taxes in the nation, from property taxes to corporate and income taxes. The state imposes a millionaire’s tax and a top corporate tax rate of 11.5%. New Jersey’s average tax bill for 2020 was more than $9,000.
Murphy cannot seek a third term but voters could well take out their frustration over taxes on Democratic lawmakers in two years and the next Democratic gubernatorial nominee four years from now.
Many Legislative Democrats narrowly held onto their seats on Nov. 2, while long-time Senate President Stephen Sweeney, D-3rd District, the state’s most powerful lawmaker, was upended by a largely unknown Republican who spent only $153 on his campaign. Skittishness in the statehouse over Murphy’s policies could hinder the governor.
In 2017, voters unhappy with Republican Gov. Chris Christie handed Murphy a landslide victory over his opponent, Lt. Gov. Kim Guadagno. The Democratic nominee in 2025 could face a similar fate.
But Ben Dworkin, who heads the Rowan Institute for Public Policy & Citizenship, pointed out Murphy so far lacks an equivalent to the Bridgegate lane closure scandal that bedeviled Christie. And, Drowkin added, Murphy has not been out campaigning across the country for president, a move that added to Christie’s unpopularity. Of course, Murphy may indeed harbor national aspirations which would necessitate trips to early primary states.
Re-energizing the party
This year, Democratic voter turnout was low while Republican turnout was high, said Dan Cassino, who heads the polling institute at Fairleigh Dickinson University. That dynamic may have been caused, in part, by the inability of national Democrats in Washington to deliver on a policy agenda, Cassino suggested.
Inter-party-political squabbling, between Murphy and Sweeney or among national Democrats over President Joe Biden’s $1 trillion infrastructure bill and $1.75 trillion spending bill, may have left voters cold.
“At what point does the common guy walk into a voting booth and say, ‘well if you can’t get along with yourself, maybe we need to shake this up and stop squabbling,’” said Greg Lalevee, business manager of the 8,200-member International Union of Operating Engineers Local 825, one of the state’s most prominent unions. “The tribalism of our politics and whatnot has, I think, taken away from accomplishing goals.”
In addition, the pandemic remains a challenge. To expand the state economy, “they have to crush COVID-19. This economy does not grow until we are at a different place,” Dworkin said. That means even better vaccination rates, especially now that the Pfizer vaccine has been approved for children ages five to 11.
While COVID-19 cases are decreasing, the state still runs the risk of a holiday surge as resident gather in person and the colder weather forces them indoors where the risk of viral spread is much greater.
Murphy has repeatedly stressed that he’d like to avoid the COVID-19 closures that ravaged the economy in 2020. And he’s insisted that he would steer clear of vaccines mandates.
The governor must also contend with issues that past administrations have struggled with for decades. Dworkin cautioned that to keep tax increases truly off the table, “he’s got to keep the… state’s fiscal house in order.”
Easier said than done. While the state’s coffers are buoyed by unexpected increases in tax revenues, $4 billion of new debt that cannot be paid back for years and $6.4 billion of federal aid from the Biden administration and billions more from the Trump administration, that money will not last.
“If states become used to… those funds being there, a few years from now when the funds are gone and they have to support services with their own revenues, it could create budget challenges,” Doug Offerman, an analyst with Fitch, said in an interview earlier this year.
And with New Jersey having one of the highest levels of debt in the country – $44.4 billion, plus an underfunded public worker pension system – those items can continue to crowd out other policy priorities. The record $46.4 billion state budget includes an all-time high single pension payment of $6.4 billion, plus billions of tax rebates, and expanded tuition assistance for two and four-year college degrees.
While Murphy has touted a “stronger and fairer New Jersey” which “works for everyone,” Bracken lamented that while the “fairer side was very-well addressed with all the progressive programs” such as paid sick leave and $15 minimum wage, the other side has been neglected.
“The stronger side – which is building a strong business community so we can achieve the sustainable revenue we need… to pay for all those programs – wasn’t addressed as aggressively,” Bracken said.
Murphy campaigned on fixing NJ Transit “even if it kills him,” and he has managed a number of fixes. More trains arrive on time, fewer are cancelled, more engineers have been hired and rolling stock has been added.
But the statewide mass transit agency has no consistent source of funding, and instead diverts funds earmarked for capital projects to operating expenses. Ridership fell during COVID-19 and has rebounded to only about 50% its pre-pandemic levels, hurting revenues.
“The work that had to be done in advance of that to strengthen NJ Transit as an operating partner … has been done,” said Tony Coscia, Amtrak’s chair and a trustee of the Gateway Development Program Corp. Murphy’s first term laid the groundwork for NJ Transit improvements, Coscia said, and its transformation can take off in the second term.
Murphy was not able to advance the $12.3 billion Gateway project – a complex and critically important infrastructure program that would improve rail service in northern New Jersey. But he shouldn’t necessarily be faulted for that, given opposition from the Trump administration. Under the plans, a new tunnel would replace the aging, two-track tunnel, which must be repaired.
The century-old tunnel is a vital link in the Northeast Corridor, one of the nation’s most heavily traveled stretches of rail, and mostly owned by Amtrak. Biden’s presence in the White House and his well-known affection for rail travel has raised expectations that the project will finally begin to move.
In October, Murphy and Biden broke ground on one piece of the Gateway project, the $1.6 billion replacement of the Portal North Bridge, a century-old swing drawbridge that often gets stuck in the open position and snarls rail traffic.
“You can’t sort of skip over the fact that for a significant part of Murphy’s term, the relationship in terms of support from Washington” was strained, Coscia said.
Other infrastructure projects, like the offshore wind developments in South Jersey, could also boost the state’s economy, Lalevee said. “I think that [Murphy] may be able to leave an indelible mark on New Jersey’s economy and infrastructure.”