The state Legislature is voting Tuesday in both Senate and Assembly committees on a spending plan with few differences from what Gov. Phil Murphy proposed less than a month ago at Rutgers University’s SHI Stadium in Piscataway, according to budget documents released Monday evening when the bill was introduced in both chambers.
The nine-month spending plan, which will cover expenses between Oct. 1, 2020, and June 30, 2021, calls for just $297 million of additional expenses on top of the $32.4 billion Murphy wants, after the COVID-19 pandemic wreaked havoc on the state’s economy and its finances. It is scheduled for a vote in both chambers on Thursday, after which it heads to Murphy’s desk.
The governor has the option to sign it, reject it entirely, send it back to lawmakers, or sign it while removing spending proposals inserted by lawmakers. Murphy will have to sign a budget by Sept. 30 – a three month extension from June 30 – otherwise the state constitution requires him to enact a shutdown until a spending plan is enacted.
This proposal, combined with a $7.7 billion stopgap measure to cover state expenses between July 1 and Sept. 30, means the state will have enacted a record-shattering $40 billion of spending for the 12 months that would typically make up the 2021 fiscal year.
The Legislature’s budget does not include the governor’s proposed “baby bonds,” nor does it include taxes on cigarettes, opioids, gun and ammunition sales, limousine services, bear hunting permits, and yacht sales.
Murphy’s budget calls for a $2.2 billion surplus at the end of the year, to act as a cushion against future financial shocks, such as a second wave of COVID-19, which the state Treasury estimates could shed off another $1 billion in state money. Lawmakers are instead proposing a $2.5 billion cash reserve.
Legislators plan to include Murphy’s much sought after millionaire’s tax – increasing the income tax rate from 8.97 percent to 10.75 percent for anything above $1 million – following a deal struck between the governor and Senate President Stephen Sweeney, D-3rd District.
That’s slated to bring in $390 million in new tax revenue, out of $12.3 billion total for the state.
Gov. Phil Murphy announces a deal on the millionaire’s tax on Sept. 17, 2020 in Trenton. – EDWIN J. TORRES/GOVERNOR’S OFFICE
The deal was credited as having been brokered by Assembly Speaker Craig Coughlin, D-19th District, and calls for rebates of up to $500 for hundreds of thousands of New Jersey families.
All three did not comment on Monday: Murphy declined to when asked at a press conference that day, saying only that “the spirit of common ground teamwork has been exceptional.” Sweeney and Coughlin were not available after an unrelated event in the afternoon.
An increase to the annual assessment on HMO premiums from 3 to 5 percent would bring in more than $100 million for the state.
And a four-year extension to the 2.5 percent CBT surtax – tacked onto the 9 percent rate levied on the state’s highest-earning businesses, rather than letting it sunset to 1.5 percent for two years before expiring – is slated to bring in $210 million.
New debt
Beyond Murphy’s plan to borrow $4 billion – after the state Supreme Court cleared the way for the governor to go ahead – lawmakers are proposing $4.5 billion of new debt.
As part of that ruling from New Jersey’s top court, which struck down a Republican-led challenge, the state Treasury has to certify that the state actually needs the money.
Murphy argued the state needs to borrow the money to make up for lost revenue after tax dollars dried up because of the pandemic-triggered economic recession. And, the governor added, mounting expenses to respond to the pandemic make the borrowing mechanism all the more necessary.
A committee of four lawmakers – likely Coughlin, Sweeney and chairs of the Assembly and Senate budget committees – will have to green-light any potential borrowing.
Lawmakers and state treasury officials were at odds earlier this month when the Legislature’s financial analysts projected the state would take in $1.3 billion more than what the treasury predicted. Instead, the legislative budget calls for essentially meeting in the middle, and its estimates are now just $584 million more than what the administration pegged.
That budget calls for $4.7 billion in pension payments, rather than the $4.9 billion Murphy proposed on Aug. 25.
