On Tuesday, standing at the 50-yard line at SHI Stadium at Rutgers University, New Jersey Governor Phil Murphy announced his revised budget proposal for the Fiscal Year 2021 which addresses spending for only the nine-month period from October 2020 through June 30, 2021. The budget spends $32.4 billion but relies on $4 billion in specially authorized borrowing to replace revenue lost due to the economic impact of COVID.
The budget also repeated Governor Murphy’s call for an increase in the income tax on all incomes over one million dollars. The millionaire’s tax has been in each of the Governor’s proposed budgets but has not yet been approved by the legislature. The budget stays true to the Governor’s progressive values with several new initiatives and continues his efforts to build the State’s budget reserves.
Solutions to Close the Budget Gap:
- Imposing the millionaires tax on all income above $1 million, increasing the marginal tax rate from 8.97% to 10.75% on income over $1 million instead of the current $5 million
- Permanently incorporating the 2.5 percent Corporate Business Tax surcharge
- Restoring the sales tax on limousines
- Removing the tax cap on boat purchases
- Raising taxes on firearm and ammunition sales
The Legislature had authorized up to $10 billion to replace revenue lost from COVID. This borrowing was challenged by the Republican party and upheld by the Supreme Court. The budget authorizes up to $4 billion in proposed borrowing which must first be approved by the legislative Select Commission on Emergency COVID-19 Borrowing.
Core Programs Preserved:
The Governor’s revised budget preserves funding for many core State programs.
- It does not cut K-12 aid, post-secondary tuition assistance, or operating aid for senior public colleges and universities.
- It restores funding for the Homestead Benefit and Senior Freeze property tax relief programs and does not decrease core municipal aid.
- It dedicates $4.9 billion to the pension fund for public workers – the largest contribution in state history.
Fair and Equitable Recovery:
- Baby Bonds initiative, which will provide a $1,000 deposit for the approximately 72,000 babies born in 2021 into families whose income is less than 500 percent of the Federal Poverty Level, or $131,000 for a family of four. When these residents turn 18, they can withdraw these funds to help them pursue higher education, buy a home, start a business, or pursue other wealth-generating activities, which will assist three of four children born in New Jersey;
- Invests $60 million into the Clean Water and Drinking Water programs to ensure safe and modern water infrastructure statewide;
- Increases the Earned Income Tax Credit (EITC) to 40 percent and proposes increasing EITC eligibility to assist tens of thousands more young adults.
- The budget includes a nearly $4.9 billion contribution to bolster the state pension system, which equals 80 percent of the Actuarially Determined Contribution (ADC) and represents the largest percentage of the ADC contributed in 25 years.
- The Budget includes a robust $2.2 billion surplus, which represents 5.6 percent of appropriations over the 12-month period. The Governor is committed to maintaining this surplus to address the very real possibility of another shutdown due to a resurgence of the novel coronavirus.
“This budget proposal is not simply about getting New Jersey back to where it used to be, but moving forward to where we need to be by building a new economy that grows our middle class and works for every single family, while asking the wealthiest among us to pay their fair share in taxes,” said Governor Murphy.
Neither of the state’s legislative leaders are dismissing any of the governors prosed taxes increases.
“At this point, to say anything’s off the table … where we’re at in this world right now would be very irresponsible,” Senate President Stephen Sweeney said prior to the budget address. “I’m not excited about taxes, but you can’t pull anything out right now.”
Assembly Speaker Craig Coughlin, D-19th District, agreed with the Senate President. “Nothing’s off the table yet,” Coughlin said. “We’re going to have to have ideas as well. The Legislature has it, it’s now our budget.”
“I agree that this has been a pandemic, and it has really hurt our revenues. I understand that. But his reaction to that is not cut, it’s not structural changes; it’s spend more, borrow more, and tax more,” New Jersey Assembly Republican Leader Jon Bramnick said of Murphy’s proposed budget.
Business advocacy groups in New Jersey were also critical of Murphy’s proposed budget.
"There is nothing in the budget, nothing at all, that posed any solutions to that problem. In fact, several of the things in the budget made the problem worse," said Tom Bracken, President of the New Jersey State Chamber of Commerce. "More than anything, it’s just ignoring the underlying problem and to try to solve it with debt and taxes, neither of which I think are necessary."