Senate holds first FY2024 NJ budget hearing in Mahwah

Opening the first budget hearing of the year at Ramapo College of New Jersey in Mahwah, Sen. Paul Sarlo, D-36th District, addressed the room.

“The goal for us today is to collect testimony from interested parties on Gov. [Phil] Murphy’s proposed Fiscal Year 2024 budget,” the Senate Budget and Appropriations Committee chairman said March 21. And for more than five hours, the committee just did that, as different stakeholders and members of the public took turns pleading their case for potential state dollars toward different projects, programs and initiatives.

“Remember, this is a proposed budget by Gov. Murphy, and now it’s in the hands of the New Jersey State Legislature over the course of the next couple of months,” Sarlo noted. “Your testimony is important to us.”

Throughout the day, testimony about the $53.1 billion budget plan came from all sectors and regions of New Jersey life, including remarks from business community advocates from the New Jersey Chamber of Commerce, the Chamber of Commerce of Southern New Jersey (CCSNJ), and the New Jersey Business & Industry Association (NJBIA).

All three organizations applauded the sunset of the corporate business tax (CBT) surcharge at the end of the 2023, a move that NJBIZ has extensively reported on, while noting the need for more relief in this area.

“I would like to start my testimony by thanking the governor and the Legislature for keeping their promise to sunset the 2.5% corporate business tax surcharge,” said Hilary Chebra, manager, Government Affairs, CCSNJ. “While New Jersey will no longer have the ongoing distinction of having the nation’s highest corporate tax rate once the surcharge sunsets, the state will remain uncompetitive compared to our neighbors, Pennsylvania, having reduced their corporate income tax rate at the start of this year.”

‘Not out of the UI woods yet’

Chebra continued that she was pleased to see no new taxes or fees in the budget plan but asked for more business relief especially in the name of unemployment insurance (UI) payroll taxes, an issue that was exacerbated when the pandemic led to the depletion of the fund. And while other states used federal funds to backfill it, New Jersey has not, leading to payroll tax increases on businesses, the next of which will hit in July.

This issue was noted by all three business advocates as they spoke during the same round of testimony.

“We feel strongly that New Jersey should follow the lead of about 36 other states and use federal American Rescue Plan Act funds to partially or fully replenish the fund,” said Chebra.

“Further concerning is the fact that we are one of the minority of states that did not use federal relief funds to replenish the state’s UI trust fund,” said Christopher Emigholz, NJBIA government affairs officer, in his testimony. “Additionally, as of March 9, just five states, including New Jersey, still have advance authorizations from the federal government to support their state unemployment trust fund. This shows our state is not out of the UI woods yet.”

“The $10 billion surplus should be used for items such as replenishing the state’s unemployment insurance fund, which many states have done,” said Michael Egenton, executive vice president of government relations for the New Jersey Chamber of Commerce. “The current payroll tax increase only adds to the business community’s economic stress and uncertainty.”

Egenton added that the state Chamber believes the $10 billion surplus should only be directed toward programs that directly shore up the state’s economy—pointing to recent turbulence in the banking industry amid broader uncertainty.

“If the banking crisis worsens and financial institutions pull back on lending, which many leading economists predict could happen, our New Jersey companies, including many small businesses, will need assistance,” Egenton explained. “Some economists put the chance of recession this year at 65%, up significantly from a few weeks before.”

The state Chamber has also called for the surplus to be used to create a grant fund that would provide working capital to entrepreneurs and business owners in every industry and across regions, an idea they have proposed for quite some time.

The business leaders have also supported the proposals for more funding to help urban areas and downtowns still bouncing back from COVID-19 as well as the call for a creation of new $100 million Boardwalk Fund.

Emigholz described the budget proposal as the beginning “of a down payment toward greater economic competitiveness,” but noted that more must be done to bring much-needed relief to small businesses.

He also noted some other positives, including:

• CBT reform legislation that will provide Global Intangible Low-Taxed Income (GILTI) tax relief (an issue the Chamber mentioned in its testimony, as well);
• pro-growth spending in workforce development, infrastructure and innovation;
• the third straight full pension payment;
• and an additional $2.35 billion deposit in the Debt Defeasance and Prevention Fund.

How to handle the surplus

And Emigholz acknowledged the varying points of view about how to best utilize the proposed $10 billion surplus, which has become something of a lightning rod this budget season.

“Proponents will say this level of surplus is responsible to prepare for a possible economic downturn amidst national and global economic uncertainty, but critics will point out that it represents taxes that were unnecessarily collected now not being used,” Emigholz explained. “The answer probably lies somewhere in the middle. Granted a bigger cushion will be helpful to avoid tax increases and spending cuts if there is an economic downturn coming up, but $10 billion may be oversized.”

“Once again, the New Jersey State Chamber of Commerce calls for our leaders to consider using the $10 billion surplus judiciously – and only for programs that ensure our economy properly weathers the potentially worsening economic storm brought on by the banking crisis,” said Egenton. “And, that our companies, especially small ones, are the beneficiaries of the surplus through programs and initiatives that come to their rescue.”

“This is the largest budget in state history and it’s [a] 50% increase since 2018,” said Chebra. “Economists and Gov. Murphy have been warning of a looming recession. So it is more important than ever that we take steps to make sure that we address long-term fiscal issues. Households around the state are starting to tighten their spending and they’re shoring up their savings. So, a healthy surplus, which can be tapped should a recession or another health emergency occur, is a wise decision.”

Emigholz also called on the Legislature to consider bringing some relief to businesses through the ANCHOR Program, which currently is available only to homeowners.

“That is tough to understand when businesses pay about half of the property taxes in New Jersey, which are the highest in the nation, and property taxes represent the largest tax paid by business taxpayers,” said Emigholz. “NJBIA requests an expansion of ANCHOR to include small businesses and manufacturers and looks forward to working with the Legislature to make this happen.”

“If we are to create a ‘next’ New Jersey, as Gov. Murphy noted in his budget address, simply doing more of the same as in previous budgets will make the change difficult,” said Egenton. “More aggressive actions are needed to improve our image and the way our citizens think about the state. Additional support for the business community will do just that. As always, the New Jersey State Chamber of Commerce stands ready to work with the State Legislature.”

The next Senate budget hearing takes place March 30, at 11 a.m., with testimony, revenue forecasts and a budget overview from the Office of Legislative Services (OLS) and the state treasurer.