The state Legislature’s top Democrat warned Tuesday that tax increases – which he has long opposed – cannot be taken off the table as a way to finance a crash-strapped state that has seen billions of dollars evaporate amid the COVID-19 recession.
“Nothing is off the table, because it can’t be off the table because we’re in unprecedented times,” Senate President Stephen Sweeney, D-3rd District, said in an hour-long editorial board meeting with NJBIZ.
Sweeney has, at least under Gov. Phil Murphy’s tenure, been opposed to many of the key tax increases backed by the governor, such as the millionaire’s tax which he blocked for two years in a row, before agreeing to it with strings attached.
But now, the state is teetering on the edge of “financial disaster” in a matter of weeks, according to Murphy, as the COVID-19 pandemic and virtual state shutdown meant to stop the spread of the virus decimate between $20 billion and $30 billion of state revenue.
“We are on the brink of having to make very tough, and quite frankly, very unpalatable decisions,” Murphy said at a daily COVID-19 press briefing in Trenton last week.
That’s out of a $41 billion budget that Murphy proposed in February—roughly $2 billion more than the budget he signed in June 2019.
Sweeney said that for many government agencies in the state, the best-case scenario might be flat funding between this year and the coming year.
“We have to look at areas, what we can fund, what we can’t fund, what we have to cut. Because we’re not borrowing $20 billion to $30 billion, it’s not happening,” he said.
The Murphy administration has fallen back on federal aid from Congress – a combined $40 billion for New Jersey and New York, lest the state see “historic” public worker layoffs.
On May 12, the U.S. House of Representatives unveiled a $3 trillion COVID-9 relief bill, which includes $500 billion in state aid, but that’s been met with intense pushback from U.S. President Donald Trump and Republicans in the U.S. Senate.
To contain and blunt the impact of the COVID-19 outbreak, Murphy and governors across the country have placed their states in near-total lockdown. The process has shown many signs of working; such as a slow and steady drop in new positive cases, hospitalizations and fatalities. But in the process, commerce in New Jersey has come to a screeching halt, and revenue from the state’s income, gas, corporate business, sales, lottery and gambling taxes have evaporated, as well as tolls and transit fares, has dried up.
A plan being pushed by Murphy calls for the state to borrow at least $5 billion under a Federal Reserve program to provide the state with immediate cash to pay for its expenses.
“This is something … we need to have as a tool in our tool kit, particularly with uncertainty at the Congressional or national level,” Murphy said in April.
But Sweeney has questioned many specifics of the plan, which he said the administration has not provided to him, or other lawmakers and their staff.
“I want to know what taxes have to go up, what’s the governor talking about cutting?” Sweeney said on Tuesday. “I have not ever said I was opposed to borrowing. I just need to know what I’m going to borrow, how I’m going to pay it back, so I’m walking into this with my eyes wide open.”
The budget deadline was pushed back from June 30 to Sept. 30, something which Sweeney said he regretted.
“We should have kept the budget to June 30. We would have gotten way more answers much quicker, rather than begging for information.”
“I’m not going to be in a position where the governor announces ‘I’m going to be laying off these people because you won’t bond, you need to bond,’ and everyone starts yelling at us because I’m not willing to bond because I don’t know what the numbers are and are given the numbers last minute.”
More from NJBIZ‘s sit down with Senate President Sweeney:
Sweeney’s own plan for letting the state and local governments furlough a combined 100,000 public workers – a quarter of those currently employed by the state or a municipality – has on the other hand drawn wariness from Murphy.
“I think we’ve got to be very careful,” Murphy said on May 5. “We need government, in many cases, more than we’ve ever needed it before.”
But the move would save a combined $750 million, Sweeney said, as cash-strapped towns scrounge for ways to save money.
“By doing furlough, it’s better than layoffs. The governor’s talking about layoffs.”
The proposal means that state and local governments can still provide retirement and health benefits to their workers while the state’s unemployment system would be on the hook for their income.
Murphy’s office declined to comment.