No lame duck deal on tax breaks, sources say

With less than a week before the lame duck session ends, the state Legislature and Murphy administration are pushing off talks for a new tax incentive program — at least until the task force scrutinizing New Jersey’s prior incentives finishes its work in April or May, according to those within the Murphy administration.

A source in the state Legislature added that a tax break deal before lame duck, which ends on Jan. 14, would be highly unlikely, and that serious talks would happen in earnest much closer to budget season, which kicks off in March, because “there’s obviously budget implications.”

“They’re too far apart and many other things are being worked on” during lame duck, this person said, adding that the vaping and independent contractors bills would likely be the main hurdles tackled before the current legislative session ends.

That means that New Jersey will continue to go without the flagship incentive programs, following the July 1 expiration of its main ones — the Grow New Jersey corporate tax breaks and the Economic Redevelopment and Growth gap financing program for residential projects.

“To now say you need to wait for the final report is from our standpoint an artificial delay and simply an attempt to move the goalpost,” Darryl Isherwood, a spokesperson for the governor’s office, said in a statement to NJBIZ. “Last fall, Sen. Sweeney said he wanted to wait until the governor’s incentives task force wraps up before taking on new incentives legislation… They said the extension was meant to give us time to negotiate a bill.”

Added a senior official in the Murphy administration: “That’s how the Legislature wants it. The long-term priority is to get the right program. We’d like to get this as soon as possible.”

Gov. Phil Murphy convened the task force in January 2019 to scrutinize Grow NJ and ERG following an audit from the state comptroller that found glaring holes in the New Jersey Economic Development Authority’s oversight of both programs. In the past year, the task force has honed in on how businesses with close ties to South Jersey political powerbroker George Norcross may have unethically or illegally benefited from the two incentive programs.

Sources within the state Legislature did not confirm or deny the administration’s assessment that incentive talks would be stalled until after the task force releases its report.

If there is “a great idea and everyone agrees… they can” move ahead, ” said one person in the state Legislature.

“I’m an eternal optimist, who knows?” Senate President Stephen Sweeney, D-3rd District, told reporters Jan. 6 before a Senate committee session when asked if a lame duck deal was still possible. But, the Senate President has, in recent weeks, repeatedly maintained that neither side was anywhere close to a deal, deflecting comments from the governor which suggested the opposite.

Strictly on the policy side, the debate has centered around whether the corporate tax breaks should be capped, that is, limited to a certain budget amount each year.

Under Grow NJ and ERG – neither of which had an overall cap – the state awarded more than $7 billion of incentives aimed at luring businesses to New Jersey.

Murphy has proposed five incentive programs capped at $400 million a year, including NJ Forward, that would replace Grow NJ and be capped at $200 million a year; the proposed NJ Aspire, which would replace ERG, would be capped at $100 million a year.

Legislative leadership has opposed an overall cap, worrying that businesses would be averse to the state if they were uncertain whether they would be shut out of the programs once the annual limit is reached.

But proponents argue that an incentive program “cap” is effectively an expenditure, which must be budgeted, and that without any limits the state would award runaway tax breaks totaling in the billions.

Murphy and the state Legislature, spearheaded by former state Sen. Ray Lesniak, a Democrat, both agree on many other proposed aspects for replacement incentive programs, such as community benefits and local hiring agreements, the alleviation of food deserts, bonuses to encourage certain types of development in federal opportunity zones, and incentives for startups.