Gov. Phil Murphy is poised to decide on a record-high $46.4 billion spending plan to cover state expenses for the next year, after the state Assembly and Senate approved the measure following hours of debate on June 24.
The bill was approved strictly by a party vote in both chambers, where Democrats hold considerable majorities: 25-15 in the Senate and 49-26 in the Assembly.
Murphy has not said whether he will sign the bill as is, or opt to remove anything from the budget before approving it, in what’s known as a line-item veto.
“I’m proud of the work done in partnership with the governor and Senate president to produce a fair and responsible budget that looks toward greater economic vitality and growth that will benefit every New Jerseyan,” Assembly Speaker Craig Coughlin, D-19th District, said in an afternoon statement after the bill passed.
Supporting this year’s budget is $52 billion of revenue, a $10 billion surplus and roughly $6.5 billion from the Biden administration under the American Rescue Plan. It’s also bolstered by $4 billion of money the state borrowed last year, at a time when the full financial and economic impact of the COVID-19 pandemic on the state was uncertain.
Instead, the state has found itself flush with billions of dollars in extra cash in a never-before-seen financial situation.
“Our decision will be guided by the goal of debt-reduction … strategic investment and avoiding a fiscal cliff,” Sen. Paul Sarlo, D-36th District, who chairs the Senate Budget and Appropriations Committee, said during the June 24 Senate voting session. “This is not a one-year budget, this is a multi-year budget.”
“I don’t believe we rushed this year,” he told reporters following the voting session. “But you’re all under the impression that we rushed.”
Democrats, who hold sizable majorities in both houses of the Legislature, accelerated the bill out of both the Assembly and Senate budget committees.
In the case of the Senate committee, the budget was approved just over 12 minutes after it was made public, drawing the ire of Republican lawmakers and open government activists.
“I don’t like big budgets that nobody knows what’s in them,” said Sen. Declan O’Scanlon, R-13th District, during the June 24 Senate voting session. “I don’t like a total lack of transparency.”
Sen. Robert Singer, R-30th District, said the budget and its process were “virtual insanity,” that the plan would do nothing to “change the way we live.”
Murphy and all 120 members of the state Legislature are up for reelection this November.
The budget deal was largely negotiated behind closed doors between Murphy, Senate President Stephen Sweeney, D-3rd District, and Assembly Speaker Craig Coughlin, D-19th District. Information was sparse ahead of the June 22 committee votes, save for piecemeal press releases jointly issued by the three men’s offices in the preceding two days.
Sarlo pushed back against notions of an opaque nature in the budget process, and denied that it lacked transparency.
“This is a 280-page document that you’ve had for three to four months,” he said addressing Senate GOP members. “So when you say that you didn’t have a chance to look at a 600-page document, that is completely inaccurate.”
Sarlo, Sweeney and Murphy do contend that the process could be more transparent and drawn out, so as to allow more public scrutiny. But, would not formally commit to enacting those changes.
“Is it a perfect process? No, and I think the Senate President made it clear and the governor made it clear: we should work to improve the process going forward, having more time between the time the budget is consummated and the time it goes to committee.”
Coughlin maintained that this budget cycle was “fairly typical,” if not better than prior years.
“I’ve been here when we have concluded budget negotiation at 8:00 and voted the next morning,” he told reporters late Thursday evening following the Assembly voting session. “I’ve been here … when there was a shutdown in a matter of hours.”
What’s in it (and not)
The budget will tap into more than $1 billion of federal ARP money over the next year: $700 million in the upcoming spending plan, $450 million for the state’s three Level 1 trauma centers, and $200 million that Murphy could spend at his discretion. Any use of the rest of the money would require legislative approval.
Under the plan, the state would add another $505 million to this year’s already-proposed $6.4 billion pension payment. That would make the 2022 fiscal year the first time since the 1990’s that the state has met the full actuarial obligations for how much money to put into the sorely underfunded public worker pension fund.
There’s $3.7 billion to pay down some of the state’s oldest and most expensive debt. And $2 billion for state’s rainy day fund, to ride out any future economic woes.
Lacking from the budget are any considerable upgrades to the state unemployment system and any major replenishment of the state unemployment fund after it was used to pay out billions of dollars in jobless benefits over the past 15 months.
The plan calls for putting roughly $206 million in the unemployment insurance fund, but Sarlo and Sweeney said that more funds coming out of the ARP pool could be forthcoming to replenish the unemployment fund.
Republicans and business groups had suggested $2.5 billion to refill the unemployment and half a billion dollars to upgrade the computer systems for the unemployment fund, the Motor Vehicle Commission and the 9-1-1 system. Democrats last year proposed putting in $50 million to upgrade the unemployment system – this budget proposes roughly $17 million.
Without the $2.5 billion, businesses could expect to see their taxes increase beginning July 1 – the same day the budget goes into effect – and then in 2022 and 2023 in order to refill that fund. In January, Murphy approved a bill phasing in the tax increases over three years
“The payroll tax increase that we could prevent is going to hit employers just one week from today,” said Senate Republican Leader Thomas Kean Jr., R-21st District. “That is absolutely unconscionable. For the record, it did not have to be this way.”
As part of last year’s agreement for enacting Murphy’s sought-after millionaire’s tax, upwards of 760,000 households with incomes below $150,000 would be getting $500 rebate checks this summer.
And the budget has roughly half a billion dollars of projects benefiting individual towns and cities across the state – something that has typically been decried as “pork spending.” That includes $24 million for an art museum in Jersey City, $15 million for demolitions in Camden, $300,000 for the Paramus library, and $300,000 for a Little League field in Franklin Township.
“What you consider pork … may not be pork to that county or that advocacy group,” Sarlo said. “Is there wasteful spending? That would be a better way” to phrase it. And I don’t believe there is wasteful spending because all of the spending here is for an intended purpose.”
Singer questioned whether the heightened level of spending was a good idea, and if the state would run out of funds in the near future to support these added costs – a phenomenon known as the fiscal cliff.
Editor’s note: This story was updated at 9:00 p.m. EST on June 24, 2021, to reflect passage of the Fiscal Year 2022 spending plan in the state Assembly, to include remarks from Assembly Speaker Craig Coughlin, to indicate that Sens. Paul Sarlo and Steve Sweeney and Gov. Murphy would not formally commit to enacting changes to the budget process, to include that $2 billion is allotted in the spending plan for the state’s rainy day fund, to include information about rebate checks for certain New Jersey households, and to include additional comments from Sen. Robert Singer.