After a little more than a year in office, Gov. Phil Murphy says not to expect many major new initiatives from his administration and instead to expect him to build out “more of the same.” By that, he means investment in things that the middle-class cares about — schools, transit, and New Jersey’s fiscal position.
At the same time, Murphy says he is already approaching this year’s budget negotiations differently, although he continues to deny having had a “frosty” relationship with legislative leaders. “We agree on most things and now we have a ‘rhythm’ going,” he said.
Murphy met with NJ Spotlight editors late last week to discuss his first year as governor, his views on various issues facing the state, and expectations for the future. He boasted that he has already delivered 48 of 52 campaign promises, with legalized marijuana one of the few still outstanding.
Time and again, however, Murphy turned the conversation to the “train wreck” he said the state was left in by former governor Chris Christie. He enumerated the condition of NJ Transit, underfunding of schools, and New Jersey’s poor fiscal condition as evidence.
“You can’t even begin to estimate the train wreck we were left with,” he said. “At every turn, things were worse than we thought.” His administration is beginning to dig out of the problems, he said, but that will take some time.
“We had 11 straight credit downgrades,” the governor noted, as an example of the state’s problems. In response, he said, he has built up a meaningful budget surplus, cut down on the use of one-shot revenues and found $800 million in savings, which he said was just the beginning.
As for his day-to-day efforts, Murphy said he spends most of his time trying to grow the state economy. As an example, he cited a trip to Los Angeles today to meet with entertainment studios to explain the state’s new tax incentive program for the film, television, and digital-production industry and why New Jersey is a good location for TV and movie development. “I’m always talking to CEOs,” he said.
The following are some of the issues facing the state that the governor expounded upon.
Murphy has agreed with the Democratic leadership to continue the phase-in to full funding of the state’s school finance law, which also calls for some districts to lose significant amounts of money.
Overall, that means a $206 million increase next year, giving nearly 400 districts a boost in aid. But for the second year in a row, more than 100 districts would see cuts in aid, some of them harsh. Some have talked about likely layoffs or reductions in programs.
When asked about districts losing aid, Murphy said the die is not yet cast and his administration is working with many of them to try to provide relief. What exactly that relief would be is unclear, but he pointed to a mix of emergency aid, maybe easing tax caps or other one-time remedies.
“We’re talking to all of them,” he said. “We are not saying we have no empathy or no sympathy. In fact, we met with Toms River and Brick on the day of our budget address.”
“We have some amount of latitude with emergency aid,” he continued. “This is year two of a seven-year phase-in, and we are digging out of a wreck, where the formula [under former Gov. Chris Christie] wasn’t allowed to work and was underfunded by $9 billion cumulatively.”
Is the governor then promising relief? He stopped short of that.
“Too early to tell how it works out,” Murphy said.
The governor acknowledged that municipal aid remains essentially flat in his fiscal year 2020 budget proposal and said that’s because of the dire financial situation he inherited on taking office.
“If you had more latitude, if I inherited something different from what I inherited, we would be doing something differently,” he said.
While general aid to municipalities would remain essentially flat, with the total amount of financial assistance from Trenton to towns coming in lower than it was a dozen years ago, Murphy provided a small increase of less than 1 percent in transitional aid, available only to cities and towns in dire financial straits.
He does not accept, however, that no increase in municipal aid must necessarily translate into increased property taxes.
“There are a lot of opportunities now for property-tax relief,” Murphy said. “The healthcare savings of $1.1 billion at the state level have companion savings at the local level of $400 million, so communities have to decide how they want to apply that $400 million. There’s a lot of movement afoot to convert that to direct property-tax relief.”
It’s unclear how much of that might go to municipalities. And the state organization representing municipalities has said it is unclear how much towns might save. Murphy asked staff to alert the New Jersey State League of Municipalities about how they might be able to save money.
Last year, he said, “We had the lowest property-tax increase on record in state history on average but that’s not enough. We have to get it to go down and I get that. But these are big numbers.”
The governor addressed concerns about the amount of funding that will go to New Jersey Transit, the state’s beleaguered mass-transit agency, under his proposed budget. While Murphy’s $38.6 billion spending plan would boost the state budget subsidy for NJ Transit operations to $407.5 million, NJ Transit will get a net increase of $25 million from his budget, and the agency itself is only planning to increase its operating budget by less than 2 percent as a result.
Significant capital-to-operating transfers will also continue, and one prominent transportation advocate said recently that she fears NJ Transit is only getting enough resources to “rearrange the deck chairs on the Titanic.”
Murphy suggested such criticism is coming “in the middle of the first reel of the movie” and that Christie allowed the NJ Transit subsidy to fall as low as $33.2 million during his two terms in office. He also defended his administration’s efforts to boost the roster of train engineers and the successful push to enhance safety equipment in the run-up to a federal deadline that he said Christie had done little to meet.
“Would I like to do more? You bet I’d like to do more,” he said. “We think all the time as a team, with the NJ Transit team, on what are the moonshots, what sort of levers can we pull that gets us as out ahead on transit as we’re out ahead on education,” he went on to say. “I don’t have a good answer for you yet, but that’s something that we think about a lot.”
Asked why he has a goal to get to 100 percent clean energy by 2050 but is still considering new natural gas pipelines and four new gas-powered plants, Murphy said the state is working on a new energy master plan and, in the meantime, you must take each decision on its own merits. He pointed to the Federal Energy Regulatory Commission’s control of interstate pipeline projects as one way he is hemmed in. Nevertheless, he said he opposes the PennEast pipeline project. As for the North Bergen gas plant and the expansion of the Raritan pipeline, Murphy said he has concerns. “When you’re adding up balls and strikes, the fact that the energy is going to New York and not New Jersey is a strike.” But, he said, there are processes in place that must be let play out.
That was also his response when asked about the large number of rate-increase requests before the Board of Public Utilities for all sorts of projects — $300 million annually to subsidize nuclear plants, a $2.8 billion request for energy efficiency, and another $1.2 billion for other subsidies, such as smart meters and a network to support electric vehicles. That’s on top of a $2.5 billion request to modernize PSEG’s gas and electric distribution systems. And that’s before any movement on offshore-wind projects.
Murphy pointed to the Board of Public Utilities, which he said he has complete faith in. “They have shown their independence, which many boards do.” When it was noted that Rate Counsel director Stefanie Brand opposes some of these requests, to the chagrin of many, Murphy said, “That’s her job. We have different advocates at the table for a reason.”
Murphy said he was disappointed that legalization of marijuana did not pass the Legislature last month but, he said, “We got close.” Nevertheless, he said working on the bill together with legislative leaders helped them to get to know one another. “There’s an experience curve.”
He said he hopes the issue will be taken up again in May, after some tweaking of the legalization bill and more education on the issues involved. But whether it passes will be up to legislators themselves, he noted.
If for some reason the Legislature refuses to move on the issue, he said he would be willing to offer a referendum. But he said legislation was the appropriate way to go and the Legislature would have to get involved at some point anyway.
If the bill doesn’t pass this spring, Murphy said he plans to expand medical marijuana. That program, he said, was another train wreck left by Christie for political reasons.
The issue of segregation
While not discussing specifically the lawsuit filed last May by a coalition of organizations that sued New Jersey to desegregate the public schools, Murphy commented on the issue of school segregation. (One study found New Jersey’s public schools are the sixth most segregated for blacks and seventh for Hispanics in the nation.)
“We spend an enormous amount of energy trying to make ourselves as desegregated and as integrated as is humanly possible,” the governor said. “I will consider literally almost anything to try to break the back of this.”
The suit has been on hold while lawyers for the state and the New Jersey Coalition for Diverse and Inclusive Schools have been discussing a settlement. Former Supreme Court Justice Gary Stein, who chairs the coalition, said recently that due to the lack of a settlement, the group may return to court.
Administration officials have said the talks are continuing and, according to Murphy, “These conversations, I think we would view them as fruitful.”
As to what specific steps Murphy might take to end school segregation, the governor said only, “To be determined.”
But he did talk extensively about related actions his administration has taken that are designed to improve the lives of lower-income and minority residents, which he said will give people the ability to move to other communities and alleviate the state’s residential segregation.
“A huge part of this is housing, so we stopped the diversion of the Affordable Housing Trust Fund,” Murphy said, referring to his decision to next year put all $60 million raised in realty transfer fees and earmarked for affordable housing into the state trust fund. Murphy’s current budget diverts three-quarters of the fees; former Gov. Chris Christie had regularly taken most of the fees every year to help balance the state budget.
“There are huge wealth diversities” among the races, he said. “I’m frankly much more focused on the opportunity gap and the wealth gap, which are all hand in hand … but the fact is this: You close the wealth gap, you are giving folks mobility that they don’t have right now and that gets right to the question” of segregation.
As the conversation shifted to economic-development tax incentives, which is a hot topic in Trenton these days and the subject of several ongoing investigations, Murphy said he is not yet ready to say whether he wants to see new tax-incentive programs enacted before the current programs are due to expire by the end of June.
Those existing programs have come under fire for being too generous and for having too little legally-required oversight; they are coming up for renewal at the same time the next state budget is due to be enacted. The issue is expected to be a main source of tension between the governor and legislative leaders, who’ve generally defended the current generation of incentive programs. There are concerns that a budget deal could be held up this year if the governor and lawmakers can’t find common ground on the incentives.
Murphy has already put forward his suggestions for renewing the tax incentives, including by making them more targeted and capped. He said he has had meetings with staff recently about “figuring out our path forward and working with the Legislature” on them.
“We don’t see them as inextricably entwined,” Murphy said of the budget process and the incentive-renewal effort. “Obviously we need a budget, that’s for sure, but we need these (incentives) as well.”
“I think we’re in a good neighborhood, but it’s way too early to tell,” he added.
John Mooney, John Reitmeyer and Colleen O’Dea contributed to this story.
This story has been updated to correct a reference to the governor’s views on the North Bergen gas plant.