Murphy Won’t Rule Out Line-Item Veto, but Keeps Talking with Legislators

John Reitmeyer | June 26, 2018 | Budget
Murphy and Democratic leaders try to bridge budget gap in closed-door talks and try to sway public opinion in competing press conferences

Gov. Phil Murphy with Analilia Mejia of NJ Working Families Alliance, left, and Lt. Gov. Sheila Oliver
There were more closed-door budget talks in Trenton yesterday but also another round of news conferences, with Gov. Phil Murphy and legislative leaders now openly jockeying for public support as they remain deadlocked on the state’s next budget just days before a potential government shutdown.

Murphy, a first-term Democrat, was surrounded by a large group of liberal activists, labor leaders, environmentalists, and clergy as he made the latest pitch for his budget plan yesterday, highlighting increased investments in key areas like mass transit and public education that they all support.

The news conference came off as a liberal show of force to Democratic legislative leaders who sent Murphy their own budget bill last week, one the governor has threatened to veto but has yet to do so.

“These are investments that not only I and we support, but which are broadly supported by the people behind me,” Murphy said during the event. In addition to the news conference, the governor is also benefitting from television commercials that are being aired by his supporters in praise of Murphy’s broad vision of increased investment in key priority areas; the Democratic State Committee also gave him a boost by hosting a telephone townhall with members last night.

But the Assembly’s top Democratic leaders also pressed their case inside the State House yesterday, gathering reporters for their own media event to defend the revenue assumptions that are the foundation of their budget bill but that have been criticized by Murphy. The Assembly leaders highlighted a series of spending items in their budget that they said are key priorities for liberals, including full funding of the Homestead property-tax relief program.

Fingers are pointed

“The Democratic budget that we passed through both houses, the Assembly and the Senate, is a reflection of our core Democratic values,” said Assembly Majority Leader Lou Greenwald (D-Camden).

Amid the finger pointing, there was also a new round of high-level budget talks later yesterday inside Murphy’s office. They came after the governor fueled hopes that some progress is being made when he said during his news conference that he may now be willing to accept some form of the lawmakers’ revenue proposals for the 2019 fiscal year that he’s previously brushed aside as unreliable. But he also refused to rule out the possibility that he could end up using his line-item veto power to simply delete up to $855 million in spending that is backed up by legislative revenue projections he still believes are questionable.

“That’s unfortunately the option that you’d be left with, which is a shame given the investments that all of us want so desperately in this budget,” Murphy said.

With a midnight June 30 deadline looming, the key issue standing in the way of a possible budget deal continues to be on the revenue side of the ledger, as Murphy’s fiscal 2019 budget plan calls for a millionaires tax and the restoration of a 7 percent sales tax to help pay for increased spending on things like K-12 education, public-worker pensions, mass transit, and property tax relief.

Democratic legislative leaders have largely agreed with the governor’s spending goals — and added to them with their own list of items, including the Homestead funding. But they have largely cast aside Murphy’s tax proposals. Instead, they want to hike taxes on high-earning corporations and to generate revenue from other fiscal initiatives, like a tax amnesty and various program audits.

Murphy not impressed by their numbers

But those are some of the things Murphy has faulted as being unreliable, previously saying the legislative spending bill relies in part on “phantom numbers.”

Greenwald and Assembly Speaker Craig Coughlin (D-Middlesex) answered that criticism yesterday by saying their assumptions are backed up by the Office of Legislative Services, the Legislature’s nonpartisan research arm.

“OLS does not work for the Democrats, they do not work for the Republicans, they work for the Legislature,” Greenwald said.

But when pressed by reporters for an OLS analysis of some of the specific items that Murphy has questioned — including the scoring of the tax-amnesty program at $150 million, and a $200 million estimate for projected expansion of the corporate-business tax base — they did not provide any evidence that the nonpartisan analysts have signed off on those estimates.

During his own news conference, Murphy tallied up a total of $855 million in projected revenues that he said he views as shaky, including assumed public-worker health-benefits savings and other savings from their prescription-drug programs.

“We must have a budget built on sustainable, reliable and real revenues,” Murphy said.

Still open to compromise, he says

But he also said as the negotiations continue that he remains open to a compromise, suggesting he’s told lawmakers he’d be willing to accept some form of a corporate-tax hike and even sign off on the tax-amnesty program, which would raise money from those who owe the state back taxes.

“I have said from the get-go, at least over the past number of weeks, there is a framework of available alternatives that I think could add up in some combination to a deal,” Murphy said.

He also said his administration is willing to increase its own sales-tax projection by nearly $130 million in the wake of a ruling issued by the U.S. Supreme Court last week that widens the ability of states to tax online-retail sales. Lawmakers have been trying to advance their own sales-tax bill after that decision, and any additional funding would help to close the gap between the governor and the Legislature.

“If it’s more than that, we’ll be the happiest people in the state,” Murphy said.

Later, the legislative leaders showed up at Murphy’s office — which is located down the street from the State House due to the ongoing renovation of the building’s executive wing — to continue their closed-door talks. Prior negotiations involved only Murphy, Sweeney and Coughlin, but this time several other top lawmakers were seen leaving the meeting, including Senate Majority Leader Loretta Weinberg (D-Bergen) and Sens. Sandra Cunningham (D-Hudson) and Teresa Ruiz (D-Essex). The meeting lasted about an hour, and the lawmakers declined comment as they stepped into their SUVs parked outside.