Heading into one of the biggest political showdowns of the year, Gov. Phil Murphy unveiled his $40.9 billion budget on Tuesday – a record amount of spending for the state – for the 2021 fiscal year, which begins on July 1.
In 2018, Murphy and lawmakers narrowly avoided a shutdown when they struck a deal at the 11th hour for a $37.4 billion spending plan. Budget talks were far quieter the next year leading up to Murphy’s signature of the $38.7 billion spending plan.
This year’s budget calls for no new increases to the sales tax – back from 6.625 to 7 percent – after it was lowered in 2016 as part of a deal by then-Gov. Chris Christie, and after Murphy tried to re-up it two years ago.
The plan also leaves out an extension for corporate business tax increases, meaning the surtax will drop from 2.5 percent to 1.5 percent for this year and 2022, before sunsetting to the default 9 percent rate. Murphy officials maintain that much of the CBT growth this year has come from many corporations overpaying taxes well into 2019, due to lingering concerns about the long-term impacts of the 2017 federal tax cuts.
“The answer to the question of affordability isn’t found in rewarding the special interests,” Murphy said in his prepared remarks. “It is found in creating new opportunities that reward our middle class – fixing what’s broken and addressing the everyday needs of New Jersey’s families.”
The governor this year has once again pledged a millionaire’s tax. Unlike previous years, Senate President Stephen Sweeney, D-3rd District, is likely to yield to the governor, according to a weekend report from NJ Advance Media. That is, however, in exchange for an increase of an additional $1 billion into this year’s public worker retirement system, Sweeney confirmed to reporters on Tuesday.
The proposed tax would make $494 million for the state, roughly half of the billion in new revenue for the state next year. Most of that would be typical tax revenue growth which the state sees year over year. But the proposal drew a frosty reaction from Assembly Speaker Craig Coughlin, D-19th District, who said in a Monday afternoon statement that he was “cautious of increasing any broad-based taxes on an already overburdened state.”
This year’s budget calls for $17.8 billion from the income tax, $10.7 billion from the sales and use tax, and $3.8 billion from the corporate business tax, which combined with other revenue amounts to $41.2 billion that the Murphy administration plans for its coffers next year.
Those dollars would support $40.851 billion of spending, and leave $1.636 billion left over.
A similar move drew the ire of lawmakers last year, when Murphy froze $235 million of spending from the budget which the state Legislature sent him, arguing that he should not stow away money when the state has sorely needed expenses to be met.
“If he wants the millionaire’s tax, he’s going to help,” the Senate president said. “They’re going to have to show a pathway to get where they belong.”
His proposed “community college for all” program would extend to foot the tuition bill for the first two years at four-year institutions. Murphy is also pushing forward a variety of fees in the health care sector, ranging from increases on taxes on the sale of cigarettes, to those for certain businesses with employees enrolled in Medicaid.
The budget proposes $174 million in shaved off costs from public worker health plans, and another $392.83 million in government departmental savings.
The budget also includes $1.26 billion in property tax relief, that is, dollars municipal governments can use to balance their books without raising the revenue via local taxes. It proposes $174 million in shaved off costs from public worker health plans, and another $392.83 million in government departmental savings.
Other revenue increases include $20 million from a proposed opioid manufacturer fees, $9.5 million from guns and ammunition, and $500,000 from the state’s bear-hunt permitting fees.
With the budget presented to the Legislature – which controls the purse strings – it will be up to lawmakers to hash out a spending plan that satisfies Murphy enough to receive his signature.
The budget data incorporates hundreds of pages and thousands upon thousands of digits—we at NJBIZ have broken down the numbers so you can learn just what it means for you:
Editor’s note: A previous version of this story indicated that Gov. Phil Murphy presented a $42.8 billion budget for Fiscal Year 2021; the budget plan for 2021 is $40.9 billion, the revenue amount is $42.8 billion. It was updated at 2:45 p.m. EST on Feb. 25, 2020. This story was updated at 8:16 a.m. EST on Feb. 26, 2020 to include confirmation from Senate President Stephen Sweeney, additional information about budget savings from public worker health plans and government departmental savings, to correct the the amount of projected revenues for the 2021 budget from $42.785 billion to $41.2 billion, and to include additional breakouts for Property Taxes and Tax Incentives.