Gov. Phil Murphy on Tuesday is proposing a $32.4 billion spending plan to cover the state’s expenses between October 2020 and June 2021, after the global COVID-19 pandemic wrecked much of the its finances.
His plan calls for cutting $1.25 billion in spending across the board, more than $1 billion in so-called “revenue raisers,” and bonding $4 billion under a landmark borrowing proposal – which he made no mention of during his address – out of the $9.9 billion of potential borrowing initially approved by the state Legislature and signed by Murphy,
His budget address, presented outdoors at Rutgers University’s 53,000-seat SHI Stadium in Piscataway, lasted just 38 minutes and clocked in at 5,073 words. Delivery was briefly paused when a sun-shelter tent was knocked over, collapsing onto several lawmakers and public officials seated close to the governor’s stage.
The stage at SHI Stadium at Rutgers University in Piscataway from which Gov. Phil Murphy delivered his revised Fiscal Year 2021 budget address. – DANIEL J. MUNOZ
Under the proposal, the budget will only be nine months, rather than a full year, when it goes into effect on Oct. 1, 2020, lasting through June 30, 2021, and will have to account for more than $2 billion of expenses that were simply delayed until the start of October.
Murphy’s spending plan for the new 2021 fiscal year clocks in at only $32.4 billion, combined with the three-month $7.6 billion “bare bones” stopgap budget he signed on June 30, that brings the total spending plan for the 12 months to just over $40 billion.
A proposed “millionaire’s tax” – twice blocked by the state Legislature – would bring in $390 million by increasing the income tax rate from 8.97 percent to 10.75 percent for any dollar earned above $1 million. A proposal to increase the taxes on each pack of cigarettes purchased – from $2.70 to $4.35 a pack – would bring in $143 million.
The plan calls for shaved off expenses to the state’s Medicaid program that would save $336 million, $59 million in cuts to the Department of Corrections, and $66 million to the Department of Children and Families.
“We have made deep cuts and found necessary economies where we need to,” Murphy said. “Some spending cuts are absolutely necessary in the face of this crisis, and, yes, some of them will hurt.”
His budget would close with a $2.2 billion surplus, which Murphy called a “much-needed cushion against revenue shocks from a second wave [of COVID-19].”
“This surplus is not a luxury. It is a product of lessons learned,” the governor said.
When Murphy presented his original budget address in February, it called for nearly $41 billion in spending. But since March, the COVID-19 pandemic shuttered roughly 1.5 million New Jersey businesses, triggering steep drops in consumer spending and record-high unemployment.
Gov. Phil Murphy delivers his revised Fiscal Year 2021 budget address at SHI Stadium at Rutgers University in Piscataway on Aug. 25, 2020. – DANIEL J. MUNOZ
“The COVID-19 pandemic has both devastated our state’s finances and highlighted the importance of the progress New Jersey has made over the past two years,” the governor said in a Monday statement. “Our revised Fiscal Year 2021 budget proposal reflects the reality of the situation that we are faced with.”
All told, the state is facing a $5.6 billion budget shortfall that could only be filled by the tax increases, by bonding money and through budget cuts, said State Treasurer Elizabeth Maher Muoio.
That’s still a far cry from the nearly $10 billion deficit the state treasury said in May the state would be facing through June 30, 2021: $2.7 billion from July 1 through Sept. 30, 2020, and another $7.2 billion between Oct. 1 and the end of next June.
“We will not turn away from the opportunity to continue building a new economy that grows our middle class and works for every single family that proudly class this state home,” Murphy said Tuesday.
The new spending plan will have to take into account the pandemic’s evaporation of billions of dollars from the sales, income and corporate business taxes.
In a best-case scenario, that means the income tax by the end of next June comes in at $2.8 billion, or 15.9 percent, less than what Murphy laid out in February. Meanwhile, the corporate business tax could take a $756 million, or 19.7 percent hit, and the sales tax could take a $960 million, or 8.9 percent hit.
Murphy’s budget calls for $14.5 billion from the income tax during this nine-month window, $9.7 billion from the sales tax and $2.8 billion from the CBT.
Gov. Phil Murphy delivers his revised Fiscal Year 2021 budget address at SHI Stadium at Rutgers University in Piscataway on Aug. 25, 2020. – DANIEL J. MUNOZ
“Besides setting off an unprecedented public health crisis, this pandemic also unleashed an economic crisis that can only be rivaled by two other times in our state’s entire 244-year history: The Great Depression and the Civil War,” Murphy said.
And the plan continues to go without the prospect of federal aid from a new COVID-relief bill making it out of Congress—billions of dollars the governor argues is vital to help the state balance its books.
The Democrat-backed HEROES Act, which passed the House of Representatives, includes $1 trillion for states and local governments. The Republican-backed HEALS Act, which passed the U.S. Senate, does not include any state aid. Murphy warned that without federal relief, he could have to cut upward of another $1 billion in K-12 funding for local school districts.
“And, this need goes beyond our borders, and into every single state, red and blue,” the governor said. “Our states need direct federal assistance, and that is an unavoidable truth.”
His budget will restore funding for two popular property tax relief programs: Senior freeze and the Homestead rebate program.
And it calls for so-called “baby bonds,” or a $1,000 check to families for the roughly 72,000 babies expected to be born in the state in 2021 for families making up to 500 percent of the federal poverty level, or $131,000 for a family of four. When the person turns 18, they can withdraw those funds.
The plan calls for subsidizing health insurance purchases for those earning up to 400 percent of the federal poverty level. For individuals, it would provide a subsidy of at least $564 a year, and at least $2,256 a year for a family of four.
Murphy called that a “long-delayed step that should have been taken a decade ago to make our health insurance marketplace more accessible, more accountable and more responsive to consumers.”
And, it calls for making the largest ever pension payment in state history, $4.9 billion. Still, just 80 percent of what the state is actuarially recommended to make on a yearly basis.
“Making this pension payment is good news for everyone in our state because it moves us down the long road to fiscal responsibility,” the governor said.
Budget breakdown
- Murphy pursues ‘revenue raisers’ in 2021 budget: Millionaire’s tax, cigarette fees, CBT and more
- Borrowing billions: Murphy plans for half of $9.9 billion allowed
- $2.2B surplus: Softening the blow of COVID’s potential second wave
- Federal relief comes in at $2.4B: Here’s how it’ll be spent
- $1.2B in cuts. Here’s what they look like: “Some spending cuts are absolutely necessary in the face of this crisis, and, yes, some of them will hurt.”
Editor’s note: This story was updated at 1:10 p.m. EST on Aug. 25, 2020, to correct the state’s current cigarette tax from $1.65 a pack to $2.70, and to include remarks from Gov. Phil Murphy.
