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Savings and surplus dollars in Murphy’s 2021 budget (updated)

The current Fiscal Year 2020 budget is expected to close June 30 with revenues clocking in at nearly $41.6 billion, compared to $39.9 billion which the state spent. That means a total $1.7 billion leftover .

For 2021, Murphy is proposing a budget that would end with a surplus of $1.6 billion. And his administration is hoping that this would be the second year in a row that the state can make a deposit into its so-called “rainy day fund,” which would allow the state to weather potential economic recessions widely viewed as inevitable in the near future.

“There’s no assumption of a financial downturn in the latter half of the fiscal year,” said one senior administration official. “Our revenue estimates are based on relatively modest economic growth assumptions, that’s what we baked into our forecast for both this year and next year.”

“The revenue estimates are fundamentally proven and responsible. We’re being responsible, we’re being cautious on those. Hopefully that helps us in a potential change in the stock market.”

The current budget sets aside $401 million for the rainy day fund, a move questioned by lawmakers who worried the state has more pressing matters. But prior to this, New Jersey was one of just three states without a rainy day fund, according to a report last year by The Pew Charitable Trusts.

“A stronger surplus, and another payment into the rainy day fund, are important signs to New Jerseyans that we, like them, understand that we can’t rush out and spend everything we have, without regard to future risks,” Murphy said in his prepared remarks Tuesday.

Under the 2021 budget, non-recurring “one-shot” revenues – or “gimmicks” as Murphy has called them – would only account for 0.8 percent of the state’s budget.

Groups represented among the thousands of protesters in Trenton on June 13 included the New Jersey Education Association; the Communications Workers of America; the American Federation of State, County and Municipal Employees; new Jersey Working Families; and New Jersey Citizen Action.

Thousands of protesters demonstrate in Trenton on June 13, 2019 from groups including the New Jersey Education Association; the Communications Workers of America; the American Federation of State, County and Municipal Employees; new Jersey Working Families; and New Jersey Citizen Action. – DANIEL J. MUNOZ

They made up 3.1 percent of the 2019 budget and 2.6 percent of the 2020 budget.

The spending plan calls for $566.83 million in shaved off expenses: $174 million from reduced public worker health care costs and $392.83 through departmental savings.  This 2021 budget calls for $2.8 billion to go towards public worker health benefits, compared to $2.9 billion in 2020 and $3.2 billion in 2019.

Included are $100 million of savings via reforms backed by the New Jersey Education Association, by adopting several provisions of a bill backed by Assembly Speaker Craig Coughlin, D-19th District, last year. The state’s largest teacher’s union, the NJEA has financed the campaign of the governor, who has resisted the retirement and health care cuts that the NJEA opposes. Like Murphy, Coughlin’s campaign has also received funds from the NJEA.

Coughlin’s proposal would let school employees pay their health premiums as a percentage of their salary, dropping costs to between 2 percent and 8 percent of their pay.

“This will be a significant achievement in the face of national trends, and the first time in memory that we have year-over-year-over-year reductions in the overall cost of health care,” the governor said in his prepared remarks.

Murphy has argued that renegotiating health care contracts would bear better fruit rather than potential cuts to the plans, supported by legislative Democrats such as Senate President Stephen Sweeney, D-3rd District.

The NJEA-based proposal Murphy unveiled Tuesday would break away from the Christie-era Chapter 78, which currently requires participants of the School Employee Health Benefits plan to pay between 3 percent to 35 percent of their health insurance premiums.

That proposal has been a non-starter with Sweeney.

“I’ve said it before, our public workers are not the enemy,” the governor said in his address. “They are our neighbors. They are the women and men who make our communities, our schools, and our state function. And, they, too, are property taxpayers … and when we can work together in partnership to ensure high-quality health care for them at a lesser cost to us all, it’s the best kind of win-win.”

Some of the cost-cuts for health plans include auditing prescription drug claims in real time, auditing dependents of health plan enrollees on their eligibility, and renegotiating the health and pharmacy benefit manager contracts.

Editor’s note: This story was updated at 7:34 a.m. EST on Feb. 26, 2020 to provide additional remarks from Gov. Phil Murphy and additional information for cost-cutting measure to health plans.

Daniel J. Munoz
Daniel Munoz covers politics and state government for NJBIZ. You can contact him at dmunoz@njbiz.com.

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