Lawmakers and the Murphy administration on Wednesday said they agreed to push the state budget deadline from June 30 to Sept. 30, and the state tax filing deadline from April 15 to July 15, as the COVID-19 pandemic grounds business to a halt and decimates tens of billions of dollars in tax revenue.
The three-month extension, which mirrors the federal tax deadline extension until July 15, means that New Jersey residents and companies have the added time to file state income and corporate business tax returns.
New Jersey was a holdout among states to push back the tax filing deadline, according to the New Jersey Society of CPAs.
Meanwhile, the growing uncertainty in how much revenue will flow through the state’s coffers means the budget deadline will need to be pushed back three months, so that lawmakers and the Murphy administration will have more time to gauge how much tax money is available.
Murphy said that the state might need as much as $20 billion to help plug holes in its budget, and that the $3.3 billion spelled out for New Jersey in the $2.2 trillion stimulus bill might only offer a fraction of relief, with most of it required to go to the state’s COVID-19 response.
Businesses up and down the state have been forced to drastically cut operations due to a steep drop in customers as residents stay home to avoid spreading the virus, and as Gov. Phil Murphy orders significant closures of “non-essential” brick and mortar shops.
“The ongoing COVID-19 pandemic has caused hardships, financial strain, and disruptions for many New Jerseyans and New Jersey businesses,” reads the joint statement from Murphy, Senate President Stephen Sweeney, D-3rd District, and Assembly Speaker Craig Coughlin, D-19th District.
The treasury does not typically know how much money it will have through the end of the calendar year until one month after the tax filing deadline, which is why the state treasurer does not give a fiscal update to lawmakers until mid-May.
While New Jersey’s constitution typically calls for a budget to be enacted by June 30, Sen. Paul Sarlo, D-36th District, said that the state would be able to push back that date on a one-time basis.
“I think we are pretty comfortable that we have good legal grounds to do a one-time, temporary budget extension,” Sarlo, who chairs the Senate Budget and Appropriations Committee, told NJBIZ. “We’re not going to reset the clock… this is a one-time opportunity.”
The June 30 date is “arbitrary,” Sarlo said, and municipal governments, operating on a calendar year of Jan. 1 to Dec. 31 – rather than the state fiscal year of July 1 to June 30 – often push back budget deadlines by several months.
The provision of the state constitution that lawmakers and the administration believe would allow such a move states that: “All moneys for the support of the state government and for all other state purposes as far as can be ascertained or reasonably foreseen, shall be provided for in one general appropriation law covering one and the same fiscal year; except that when a change in the fiscal year is made, necessary provision may be made to effect the transition.”
“This will allow the administration and the Legislature to focus fully on leading New Jersey out of this crisis, and to allow for a robust, comprehensive, and well-informed budget process later in the year,” the joint statement from Murphy, Sweeney and Coughlin says of the extended budget deadline.
In February, Murphy proposed a $40.9 billion spending plan, which would have been supported by $42 billion in tax revenue. But the COVID-19 economic slump has torn through New Jersey’s main sources of funding: the sales, income, corporate business, casino and gas taxes.
Just last week, the state treasury announced it would freeze $920 million of spending through June 30, and that market chaos on Wall Street shaved $6 billion of value off the state’s public worker pension fund during the first two months of 2020.
Keeping the lights on
Legislation would be needed to extend the state budget and tax filing deadlines, Sarlo said. Moreover, the state would need to enact a stopgap measure legislatively so that the state can keep the lights on and pay bills during that three-month period.
That bill would have to amend the 2021 fiscal year, so that it runs Oct. 1 to June 30, 2021, rather than start July 1, 2020, according to Matt Platkin, chief counsel for the governor’s office.
There would be no new programs or capital allowed during this period, Sarlo added, and the state would have to borrow money.
A fourth federal stimulus bill is already being floated in Congress, and Murphy has said it should include the elimination of the $10,000 federal cap on state and local tax deductions—a product of the 2017 federal tax cuts.
“New Jersey is already an expensive place to live, and, right now, the coronavirus outbreak is hitting us hard — impacting our families, their jobs, their incomes, and local business owners,” U.S. Rep. Josh Gottheimer, D-5th District, said in a Tuesday statement also calling for the reinstatement of the full SALT deduction.
“Our state has the second highest number of coronavirus cases in the country, and with those numbers continuing to rise, our families need real economic relief,” Gottheimer added.
House Speaker Nancy Pelosi has shown increasing interest in that proposal.
Editor’s note: This story was updated at 11:30 a.m. EST on April 1, 2020 to include comments from NJCPAs, state Sen. Paul Sarlo, U.S. Rep. Josh Gottheimer and information regarding potential new federal stimulus measures circulating at the congressional level. This story was also updated at 2:48 p.m. EST on April 1, 2020 to include further information legislatively extending the state budget from Matt Platkin, chief counsel for the governor’s office.