Murphy Hits Brakes on Diversion of Funds from Housing, Energy Programs

Colleen O'Dea, Tom Johnson | March 6, 2019 | Budget
Siphoning of realty-transfer fees had cost affordable housing effort $300 million over last decade

Credit: Edwin J. Torres/Governor's Office
Budget FY 2020
Gov. Phil Murphy pledged to end the practice of diverting funds from state affordable-housing and clean-energy programs, a budget tactic embraced by previous governors that he had continued, albeit not as aggressively as his predecessors.

His proposed budget for fiscal year 2020 ends the diversion of nearly $60 million in realty-transfer fees from affordable housing programs to other items in the state budget. Over the last decade, those housing programs had endured a loss of more than $300 million in funds supposedly dedicated for that cause.

The administration’s spending plan for next year also whittles money siphoned from the state’s clean-energy program to $87 million, a far cry from the $271.8 million diverted in the 2014 state budget under former Gov. Chris Christie. Since the 2010 state budget, more than $1.6 billion in clean-energy funds have been tapped to plug recurring holes in the budget.

Housing and clean-energy advocates largely welcomed — as did Democratic legislators — the efforts to end the practice of diverting funds targeted to specific state programs. The tactic had also been frowned upon by Wall Street rating agencies, which railed against the diversions and the use of non-recurring revenues to balance the state budget.

Advocates, business interests applaud

In the proposed new spending plan, the administration said it reduced the reliance on non-recurring revenues by over $400 million, to 1.7 percent of the budget, compared to an annual average of 3.4 percent under Christie.

“One-shot revenues are down to only 1.7 percent, a decrease of one-third over the current budget and one-half the average yearly amount across the prior administration,’’ Murphy told lawmakers during his budget address at the State House.

The New Jersey State Chamber of Commerce likewise credited the administration’s efforts to scale back diversion of funds and use of one-shot use of revenues. It has been a critic of past diversions, including money pulled from the state’s Transportation Trust Fund, unemployment insurance, and the surcharge that funds clean-energy programs.

Murphy’s proposed budget also scales back diversions from transportation, replacing a $50 million diversion from capital reserves and a $25 million grab from the Turnpike Authority, while adding $25 million in new transportation spending.

“On the whole, my organization doesn’t like to see funds diverted, it goes against the purposes of what government should be doing,’’ said Michael Egenton, executive vice president of the chamber.

Enough money for 590 affordable homes

Assemblyman Benjie Wimberly (D-Passaic) the chair of the Assembly Housing and Community Development Committee, agreed. “This is great news because, as you know, there was an uproar last year when it was diverted. The need is just here,’’ he said, referring to affordable housing.

Putting $59 million into the housing trust fund could lead to the construction of 590 new homes that are affordable to those with limited means, according to advocates. For a progressive governor, addressing concerns raised by housing advocates and environmentalists quells unrest among some of the most loyal parts of Murphy’s base of supporters.

“Housing affordability is an enormous concern for New Jersey residents,’’ said Staci Berger, president and CEO of the Housing and Community Development Network of New Jersey. “Today’s announcement brings hope for our friends, families and neighbors who are struggling to make ends meet.’’

The $87.1 million pegged in the governor’s proposed budget for diversion from the state’s Clean Energy Program is the lowest amount since $52.5 million was siphoned away in fiscal year 2011. The fund provides financial incentives to businesses and residents to curb energy use and promote cleaner ways of producing power.

Clean-energy advocates and businesses have sought to reduce the raids for years with little success. They argue the practice hampers the state’s efforts to switch to cleaner fuels and reduce emissions contributing to climate change — top priorities of the Murphy administration.

Clean-energy fund has been frequent target

The program, funded by a surcharge on utility bills, typically raises more than $300 million a year, although seldom it is entirely spent. That leaves the program vulnerable to diversions when shortfalls arise elsewhere in the budget.

Murphy has tried to limit raids on the fund, but still diverted $146 million in the current budget, according to the administration’s data. The diversion proposed for the coming year will only fund energy costs at NJ Transit, eliminating the current practice of using clean-energy funds to pay energy bills at state-owned buildings and facilities.

“We are thrilled to see less funds being diverted,’’ said state Board of Public Utilities President Joseph Fiordaliso, who is steering efforts to achieve the administration’s goal of 100 percent clean energy by 2050.

Conservation groups agreed, citing the impact of more than $1.5 billion diverted during the Christie administration.

These diversions hurt New Jersey’s efforts to switch to cleaner fuels to produce electricity and hamper efforts to be less dependent on fossil fuels,’’ said Ed Potosnak, director of the New Jersey League of Conservation Voters.