Bloomberg
Murphy Seeks Record $44.8 Billion Election-Year N.J. Budget
(Bloomberg) — New Jersey Governor Phil Murphy proposed a record $44.8 billion of spending in his election-year budget, seeking no new taxes or major cuts while funding more assistance for middle-and low-income voters and the state’s first full pension contribution in more than 25 years.Many of Murphy’s fiscal priorities will appeal to the public employee unions that helped get the Democrat elected in 2017. Now seeking a second term in November, Murphy is planning for one-time tax-relief payments to 760,000 households; broader eligibility for senior prescription and child-health programs; expanded free college for students of little means; and down-payment assistance for first-time home buyers.“We have taken a critical look at the operations of government itself to ensure that we are doing things as efficiently and effectively as possible,” Murphy, 63, said in an address delivered via livestream. “New Jersey is done kicking problems down the road. We are solving them.”Murphy’s spending proposal is 8.8% higher than the current 2021 fiscal year, and 29% higher than the one he inherited from Republican predecessor Chris Christie. Federal stimulus helped ease the coronavirus pandemic’s impact on state revenue, while shutdowns were shorter than forecast last summer and significant lockdowns were avoided during the second wave of cases, according to a briefing prepared by the office of state Treasurer Elizabeth Muoio.Revenue forecasts for the current fiscal year are $3.2 billion higher than Murphy’s administration predicted, largely because of a one-time boost from a new alternative income tax that allowed business owners to avoid a $10,000 federal cap on state and local income-tax deductions. The tax is expected to be revenue neutral because any amounts paid will eventually result in credits.Deficit BorrowingAt the same time, debt payments loom on Murphy’s unprecedented $4.3 billion in borrowing he said was needed to make up for revenue lost in the pandemic, which hit New Jersey early and hard and continues to hamper the state’s economy. More than 40% of jobs lost still haven’t been recovered, according to treasury data. Sales-tax growth rates that hit 10.8% in January 2019 are less than half that figure two years later.Murphy is proposing a total $1.25 billion in direct homeowner aid against the sting of the nation’s highest property taxes, averaging $9,112 in 2020. The vast majority, $709.9 million, would go to a middle-class tax rebate of as much as $500 per household, as promised when Murphy enacted a millionaire’s tax in September. The checks would arrive starting in July, four months before the election.The pension payment, $6.38 billion, marks a 34% increase over the current fiscal year and matches the actuarially required figure. New Jersey last made a full pension payment in 1996. Both Democratic and Republican governors have skipped or cut contributions to fund tax cuts and other budget priorities. Murphy, a retired Goldman Sachs Group Inc. senior director, had set a goal to increase the payment to 80% in fiscal 2022 and restore full funding by 2023.“Phil Murphy is truly the Man Of The Hour,” Hetty Rosenstein, New Jersey state director for Communications Workers of America, said in a statement. “Governor Murphy has consistently delivered above and beyond all expectations.” The union represents more than 40,000 state workers.Senate Republican Budget Officer Steve Oroho said the spending plan was “focused solely on boosting the governor’s re-election campaign.”“If Governor Murphy is re-elected, it’s an absolute certainty he’ll call for tax increases next year to keep his spending spree going,” Oroho said in a statement.Senator Declan O’Scanlon, a Republican on the budget committee, said Murphy was disingenuous about his claim there were no tax increases in the budget, because payroll taxes, to boost the state’s unemployment fund, will increase on July 1. He also criticized the 11% in revenue from non-recurring sources.“The spending in this budget is nowhere close to sustainable,” O’Scanlon said in a statement.Pension PledgeMurphy’s pension move runs counter to those in other states, with some cutting or postponing contributions amid shortfalls caused by the novel coronavirus. Colorado canceled a $225 million payment for unfunded liabilities that was planned for fiscal 2021. Oklahoma reduced the portion of tax revenues dedicated to its pension system by 25% through fiscal 2022, and Kansas delayed a contribution increase that was scheduled for fiscal 2021, according to the Pew Charitable Trusts, a Philadelphia-based non-profit group that researches public-interest matters.U.S. pension plans are more reliant on investment earnings for contributions: In 2020 investment returns made up 71% of revenues for plans, up from 69% in 2019, while employer contributions shrunk, according to the National Conference on Public Employee Retirement Systems, a public-pension trade group.A reliance on investment returns, paired with U.S. equity-market gains, pushed up the funded ratio of the 100 largest plans to 78.6% in the fourth quarter, according to actuary Milliman Inc. That’s the highest quarterly mark since Milliman began tracking public plans in 2017. New Jersey’s funded ratio was 41.6% as of July 1, 2019, the recent analysis available, according to data from the state pension and benefits division.Schools, VeteransBesides pensions, education is a top Murphy priority. State aid for kindergarten-through-12th-grade school districts, a form of property-tax relief, accounts for more than one-fifth of total spending. Murphy is proposing a record $9.26 billion, or 7% higher than the current year. Districts use the cash to fill budget gaps and to provide such services as transportation and special education.Murphy’s spending is helped by revenue projections that appeared rosier than previously forecast. Sales-tax collections have climbed 3.9% since August, after dropping 14% between April and July. His budget projects a 2.7% increase in fiscal 2022. Overall state revenue is projected to grow 2.4% to $40.9 billion, driven largely by taxes on incomes and corporations.The plan will also make refundable and double the number of families eligible for the child and dependent care credit; and would expand a property-tax deduction for veterans who served in peacetime, and an earned income-tax credit to senior citizens without dependents by lifting the 64 age cap.New Jersey was among high-cost states hit by the Trump administration’s $10,000 cap on state and local income-tax deductions. Democratic lawmakers have pushed for its repeal. Last year, New Jersey enacted a workaround that allowed businesses to pay an extra tax in exchange for a credit on their personal income taxes. The federal SALT cap only applies to individuals. A half-dozen states, from New York to California, are slated to take up similar measures in 2021.(Updates with Murphy, Republicans’ quotes starting in third paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.
