With Votes To Spare, Dems Pass $38.7B Budget, No Boost In Millionaires Tax

John Reitmeyer | June 21, 2019 | Budget
Governor has indicated he might take line-item veto pen to a spending plan not to his liking

Senate President Steve Sweeney with, L to R, Sens. Paul Sarlo (D-Bergen) and Nicholas Scutari (D-Union) after yesterday's votes
More than 80 members of the Legislature voted yesterday in favor of the majority Democrats’ $38.7 billion spending bill, an impressive show of force for the “no new taxes” posture they’ve adopted this year in the face of Gov. Phil Murphy’s repeated calls for increased levies on the rich.

The legislative budget bill passed along party lines in the Assembly, but it picked up several Republican votes in the Senate where members of the minority party credited their colleagues for rebuking the wishes of the Democratic governor.

Yesterday’s votes — 53-26 in the Assembly and 31-6 in the Senate — officially sent the spending bill to Murphy, where it faces an uncertain fate at best.

The governor has a little more than a week to decide whether he wants to remove sections of the legislators’ budget using the line-item veto, or perhaps try to work out a compromise with leading lawmakers using the conditional veto. Yesterday’s wide vote margins could also dissuade Murphy from choosing an outright veto of the entire spending measure, as it would risk the first gubernatorial override in New Jersey in two decades or even a shutdown of state government.

Murphy didn’t tip his hand yesterday as his office declined to comment on the Legislature’s action. But a letter he sent to lawmakers earlier in the week suggested line-item vetoes could be coming as Murphy faulted several revenue assumptions that are baked into the bill and directly threatened to take “corrective action.”

Democrats back their leaders

No matter what, a new budget must be enacted before July 1 to avoid a state government shutdown.

Assembly Speaker Craig Coughlin
For their part, legislative leaders reveled in the big margins once all the votes were tallied in the State House yesterday.

“I’m proud of the budget that we just passed,” Assembly Speaker Craig Coughlin (D-Middlesex) said to reporters.

“I think we had a very good day,” said Senate President Steve Sweeney (D-Gloucester), who also spoke to the press after the budget vote in his house.

Much of the Legislature’s fiscal year 2020 budget bill resembles the spending plan the governor proposed several months ago, retaining proposed increases for K-12 education, public-worker pensions, and mass transit, among other items.

But there are also major differences, including the omission of several tax and fee hikes proposed by Murphy, most notably his call to establish a true millionaires tax. That proposal would raise nearly $540 million in new revenue by increasing the top-end rate on all earnings over $1 million from 8.97 percent to 10.75 percent. Right now, that rate is levied only on earnings over $5 million.

Sharp divisions between governor and lawmakers

Coughlin and Sweeney had openly opposed the millionaires tax well before Murphy introduced his version of the budget, and despite a last-ditch push by the governor in recent weeks, the two leaders took pride in the solidarity shown by most rank-and-file members. It also drew praise from many Republicans, including some who ultimately didn’t end up voting for the Democrats’ budget.

“I do think it’s important to recognize that this budget took out the millionaires tax … and other fees,” said Sen. Steve Oroho (R-Sussex) who ended up voting against the bill. “I think that is extremely important to remember.”

In all, seven of 14 GOP senators voted along with the majority Democrats in the upper house. Likely playing a factor was a decision made by the legislative leaders to strip out some controversial spending items such as legal aid for undocumented immigrants and family planning funding for Planned Parenthood and other organizations. They were instead advanced in a separate, supplemental spending bill.

Meanwhile, two Democrats, Sens. Nia Gill and Ron Rice (both D-Essex), did not cast votes at all on the broader spending bill. Gill spoke out during the floor debate against the decision to leave out the millionaires tax, saying it was only a few years ago that lawmakers voted to repeal the estate tax, which also benefited the state’s wealthiest residents.

“I think this budget … represents more of a trickle-down economic theory than a progressive step forward for the middle class and the people and the citizens of our state,” Gill said.

Credit: NJTV News
Legislature NJ
The budget bill also drew criticism during the debate in the Assembly, but from Republicans who wanted to see more drastic measures taken to address high property taxes and some of the budget’s major structural problems, such as the grossly underfunded public-employee pension system.

“It is time to make the fundamental changes in this state that sends a message to taxpayers that we are doing the tough stuff,” said Assembly Minority Leader Jon Bramnick (R-Union).

Governor decries ‘voodoo math’

Murphy, in the letter he sent to lawmakers Wednesday, highlighted concerns about several revenue and spending items that were incorporated into the final version of the legislative budget. In a news conference, he also accused the Legislature of relying on “voodoo math” to prop up some of the new spending with projections in some areas that veered from forecasts made by either the Department of Treasury or nonpartisan legislative budget analysts.

Those projections account for some $230 million in new revenue in the legislative budget and the spending items they would fund, including a long list of lawmakers’ pet projects, are now prime candidates for a line-item veto.

Asked about the projections yesterday, Assembly leaders mistakenly said they lined up with those made by the Office of Legislative Services.

In a separate news conference, Senate Budget and Appropriations Committee Chair Paul Sarlo (D-Bergen) pointed to recent testimony by state Treasurer Elizabeth Maher Muoio on the repatriation of overseas profits. But the administration has disputed the Legislature’s final projection on those revenues.

“We’re standing by our numbers,” Sweeney said in response.

Meanwhile, the Senate leader also acknowledged that the removal of some of the controversial spending items from this year’s budget bill may have helped ease the way for some GOP budget votes in the Senate.

“Did it help? It probably helped some,” Sweeney said.

Watch John Reitmeyer discuss the finer points of the budget with David Cruz of NJTV News.