The global pandemic and deep economic recession have left little room for the political maneuvering typical of the negotiations over the state’s multibillion-dollar spending plan. Lawmakers are sending Gov. Phil Murphy a $32.7 billion budget, which would cover the state’s expenses between Oct. 1 and June 30, 2021.

New Jersey’s fiscal year typically starts on July 1, but the deadline was pushed back three months to account for the three-month federal and state tax filing extensions and to deal with the economic downturn brought about by the COVID-19 pandemic. Now, Murphy must sign the budget by Sept. 30, otherwise he would have to order a government shutdown until a spending plan is enacted. On Sept. 23, he indicated that he would indeed sign the budget lawmakers sent him the next day.

There are few differences between the budget Murphy proposed in an Aug. 25 speech at Rutgers University’s SHI Stadium and the plan approved by the Legislature. The governor has the power to veto individual spending once it’s sent to his desk.

“All in all, I am proud of the budget that we have agreed upon,” Murphy said at a news conference on Sept. 22. “[T]his budget lives up to our most important objective – preparing our state for a stronger, fairer, and more resilient future.”

The budget moved through the statehouse at breakneck speed after its introduction on the evening Sept. 21—just over a week before the deadline. It includes $4.5 billion of borrowing, which Murphy can draw upon without voter approval thanks to powers the state constitution grants him “for purposes of war, or to repel invasion, or to suppress insurrection or to meet an emergency caused by disaster or act of God.”

Murphy originally sought $4 billion in borrowing; lawmakers added another $500 million.

A considerable portion of the borrowing comes from a Federal Reserve program meant to bolster the finances of states that have taken an economic hit because of the COVID-19 pandemic. Those bonds will be paid back in between three to five years. The rest of the debt will go out through the public market and be paid out over a course of decades.

Republicans and business groups have criticized the budget, worried that the record-levels of spending do not reflect the state’s dire financial situation. Critics also complain that the expenditures will exacerbate what the governor has frequently described as “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.”

Sen. Declan O’Scanlon, R-13th District, said he wore a Christmas tie to a Sept. 24 hearing because of what he characterized as a shower of gifts in the plan. “I figured with the presents included in the budget, you might be starting the holidays a little earlier this year,” he quipped.

Assembly Republican Leader Jon Bramnick, R-21st District, decried the budget as a “wild spending spree.”

“We are in the middle of an economic disaster,” Bramnick said in a Sept. 22 statement. “Now is not the time to score political points with the budget.”

Despite the havoc wrought by the COVID-19 pandemic on the state’s finances, both the governor’s office and legislative leaders are proposing record levels of spending for the 12 months that would typically make up the 2021 fiscal year: $40 billion put forward by the administration and $40.3 billion from the Legislature.

But Senate Budget Chair Paul Sarlo, D-36th District, told reporters that many of the revenues are there to “ensure the government can continue if there’s a second wave, if the economy doesn’t rebound as quickly as [we] are hopeful it will.” And much of what critics called “pork spending” has, according to Sarlo, been put into state budgets for years.

The proposal calls for a $2.5 billion surplus, $300 million more than what Murphy proposed at the end of August. “There are still meaningful and deep cuts in this budget and programs that we really want to do that we can’t do,” the governor said on Sept. 23.

Among the spending Republicans cited were a proposed $4 million to Essex County’s First Tee golfing program, $1.5 million to the New Jersey Hall of Fame Foundation and $1 million to the Battleship New Jersey Museum in Camden. The budget sent to Murphy also provides $1 million for continued restorations to Hinchcliffe Stadium in Paterson, $500,000 to the Newark Museum, and $150,000 toward the Thomas Alva Edison Memorial Tower and Museum. Metuchen’s shade tree management gets $100,000, and East Brunswick gets $400,000 to renovate its town hall.

“A budget that already had too much borrowing and spending when proposed now has more borrowing and spending for items completely unrelated to COVID-19,” Christopher Emigholz, vice president of government affairs at the New Jersey Business & Industry Association, told lawmakers during the budget committee hearings on Sept. 22.

On the revenue side, the budget calls for an array of new tax increases, even though Murphy will not get every potential source of revenue outlined in his initial August budget address.

We are in the middle of an economic disaster. Now is not the time to score political points with the budget.
— Assembly Republican Leader Jon Bramnick, in a Sept. 22 statement

A millionaire’s tax hike would increase the income tax rate from 8.97 percent to 10.75 on every dollar above $1 million. It’s slated to bring in $390 million for the state through the middle of next year.

As part of a deal brokered between Murphy and the Democratic legislative leadership, the state will roll out rebates up to $500 for hundreds of thousands of New Jersey families with income up to $150,000 sometime in summer 2021, which is when this new budget ends. Republicans have dismissed the rebate as an election gimmick for the governor, who faces the voters again next November.

The deal between Murphy and Senate President Stephen Sweeney, D-3rd District, was credited as having been brokered by Assembly Speaker Craig Coughlin, D-19th District—often seen as a mediator between the two factions.

Lawmakers and Murphy agreed on a four-year extension to the 2.5 percent corporate business surtax that is tacked onto the 9 percent levied on the state’s highest-earning businesses, rather than letting the CBT sunset to 1.5 percent for two years before expiring. The surtax is slated to bring in $210 million through the middle of next year, while an increase to the annual assessment on HMO premiums from 3 percent to 5 percent would bring in $100 million.

“Businesses paid their fair share and were told this would be temporary. Now that these businesses have a glimmer of hope, the state is once again tapping them,” said Mike Egenton, executive vice president of the New Jersey Chamber of Commerce, at the Sept. 22 hearing.

The legislative budget takes out many of the tax increases that Murphy sought in his own plan, such as those on cigarettes, guns and ammunition, yacht sales, opioids, bear hunting permits and limousine services.

Sarlo contended that borrowing would be better than raising those tax because, should the federal government provide more aid states via a new iteration of a COVID-19 relief bill, then the money could be used to pay down some of the new debt. Murphy agreed that the federal aid could help reduce the debt load.