Murphy: There Will Be No Shutdown of State Government

John Reitmeyer | June 28, 2019 | Budget
Announcement signals governor has given up on push to make a true millionaires tax part of Trenton’s next budget

Credit: Governor's Office
Gov. Phil Murphy making remarks in Secaucus yesterday
Gov. Phil Murphy officially ruled out a government shutdown over the state budget yesterday, increasing the likelihood that he’ll instead use the line-item veto pen to get a spending plan more to his liking in place within a matter of days.

Murphy’s budget announcement came during a news conference at the Secaucus Junction train station, where he also indicated he was accepting the Legislature’s offer to increase the state’s subsidy for New Jersey Transit by another $50 million.

But what else will remain in the fiscal year 2020 spending bill that lawmakers sent to the governor last week remains to be seen. Murphy still has several days left to enact a new budget before the next fiscal year begins on July 1.

The state constitution gives the governor the power to remove any items from the legislative spending bill that he disagrees with using the line-item veto pen. Last week the governor threatened that he would take “corrective action” after voicing concerns about several revenue and spending items contained in the legislative budget. The next announcement from him is expected to come on Sunday.

“The final details on the budget that I will sign are still to be determined, but I will meet our constitutional deadline,” Murphy said yesterday.

No millionaires tax, yet

One thing that did become clear yesterday: Murphy’s announcement signaled he has given up on his push to make a true millionaires tax part of the state’s next budget, since his line-item veto power allows him only to strike things from the budget, not add them.

The news that Murphy would not be the cause of a government shutdown came on the final legislative day before the start of the new fiscal year, a typically busy time for lawmakers as it kicks off their informal summer break. The assumption in the State House is that at least some line-item vetoes are pending.

Credit: NJTV News
Senate President Steve Sweeney
“We know he’ll do something with it, but it’s a good budget,” Senate President Steve Sweeney (D-Gloucester) said yesterday while speaking to reporters after the voting session came to a close. “I think we gave him a very good budget to work with,” Sweeney went on to say.

Much of the $38.7 billion budget bill that was easily passed by both houses of the Legislature last week resembles the spending plan that the governor proposed to lawmakers several months ago, including increases for K-12 education and public-worker pensions, as well as a boost in budget reserves.

But there are also major differences, most notably the Legislature’s rejection of Murphy’s call to establish a true millionaires tax. That proposal sought to raise nearly $540 million in new revenue by increasing the rate on earnings over $1 million from 8.97 percent to 10.75 percent. Right now, that rate is only levied on earnings over $5 million.

Murphy changed course

Up until yesterday, Murphy had been saying “all options are on the table” when he was asked how he might influence lawmakers to reconsider their rejection of that and other tax hikes in his proposal. That suggested a government shutdown could be one pressure point, especially as Murphy began holding a series of public events in recent days to stress the need for the wealth surcharge. But with the July 4th holiday coming next week and facing the prospect of beach and park closures, Murphy changed course yesterday.

“I cannot and I will not subject our residents to the inconveniences they would suffer under a government shutdown,” he said.

The governor went on to say he would continue pressing for the millionaires tax beyond the budget deadline even as he was conceding it would not be part of the FY2020 spending plan.

“Make no mistake, I have very strong feelings about some of the Legislature’s wrong choices in our next budget and I will continue to press our case for smart investments and tax fairness,” he said.

The governor’s announcement yesterday also signaled that he was not inclined to use several options still at his disposal — an outright veto of the spending plan or a conditional veto — since they would likely result in a shutdown.

Beyond the line-item veto, the state constitution also gives the governor the sole authority to certify revenues for the next fiscal year, which allows him to control the bottom line by overruling legislative revenue forecasts.

More funding for NJ Transit

Murphy refused to tip his hand any further yesterday, saying only that he’d taken just “one option off the table.” But he also confirmed that he would keep the extra funding for NJ Transit in the spending bill no matter what happens.

Credit: NJTV News
Loretta Weinberg
“We are glad the Governor agreed with us, and I would like to thank him for meeting with me last month to discuss this critical funding need,” said Senate Majority Leader Loretta Weinberg (D-Bergen), the leading advocate for that boost in aid.

Other changes in the legislative spending bill were $50 million more for K-12 extraordinary special-education aid, $48 million more for shared-services grants and an extra $18 million to fully fund the Senior Freeze property-tax relief program.

More than $100 million in additional spending items were also included in the bill — chiefly lawmakers’ pet projects —and they’re now considered to be prime targets for line-item cuts by the governor.

Questions about revenue projections

Meanwhile, Murphy has also raised concerns about the revenue side of the lawmakers’ budget, including a corporate-business tax forecast that was roughly $230 million higher than the Department of Treasury’s. But Sweeney defended the legislative forecasts yesterday, saying those projections last year proved to be more accurate than Treasury’s.

“We trust our numbers,” Sweeney said.

Assembly Speaker Craig Coughlin (D-Middlesex) did not speak to reporters yesterday, but Sweeney indicated the two legislative leaders would be speaking with each other once Murphy takes action to determine what to do next. If line-item vetoes are coming, one option for lawmakers would be to try and override each of them individually, but Sweeney said no decisions have been made at this point.

“We want to see what he’s doing,” Sweeney said.

He also questioned the governor’s decision not to seek out legislative leaders to engage in serious budget negotiations in the final days before the June 30 deadline.

“It made no sense to me, the speaker or any of our members,” Sweeney said.