Murphy Signs $38.7B Budget But Uses Line-Item Veto to Clip Lawmakers’ Wish List

John Reitmeyer | July 1, 2019 | Budget
Governor redlines nearly $50 million in legislative spending and impounds another $235 million

Credit: NJTV News
Gov. Phil Murphy explains his budget to supporters in Trenton yesterday.
Gov. Phil Murphy yesterday enacted a $38.7 billion budget for the new fiscal year that begins today, but only after using the line-item veto to remove a modest share of added spending sought by lawmakers.

Nearly $50 million in legislative appropriations didn’t make the final cut thanks to the line-item veto, including proposed funding for shared-services studies, the state’s school-choice program, and a grant for Cooper University Hospital, the Camden-based healthcare facility.

Murphy also issued an executive order that will keep another up to $235 million in spending impounded in “reserve” as he waits to see how well state revenues perform during fiscal year 2020. He cited concerns about several revenue assumptions that were in the legislative budget bill, and the need to maintain healthy reserves amid concerns about a looming recession, as reasons to take that action.

“I am using the full power of my office to protect our fiscal house,” Murphy said yesterday at a public rally in Trenton with supporters that followed the budget’s official adoption.

But much of the budget bill that lawmakers sent to Murphy, a Democrat, a little over a week ago remained intact following the governor’s action. That led Democratic legislative leaders in both houses to declare victory as the spending plan became law yesterday. They also sent no signals that attempts to override the line-item vetoes are now looming in either house.

Credit: NJTV News
Senate President Steve Sweeney reacts to Gov. Phil Murphy's budget decisions.
“We gave him a good budget. We’re glad he recognized it (and) we’re glad he signed it,” said Senate President Steve Sweeney (D-Gloucester) during an afternoon press availability.

Meanwhile, Assembly Speaker Craig Coughlin (D-Middlesex) reacted in a brief statement that said the FY2020 budget “funds our shared priorities.”

Murphy’s administration didn’t release a list yesterday of the specific items that remain impounded under the governor’s executive order, but the final version of the budget he enacted sets the state up to increase spending in several key areas, including K-12 education, mass transit and public-worker pensions.

$50M added to NJ Transit state subsidy

Murphy accepted the Legislature’s request to add another $50 million to the state subsidy for New Jersey Transit operations, pushing that total to $457.5 million. The final budget will also underwrite a $3.8 billion public-worker pension payment, which will be a record total. It also incorporates increased funding lawmakers sought for Senior Freeze property-tax relief and extraordinary K-12 special education aid.

Another nearly $1.3 billion will also be kept in reserves, including $401 million in the state’s long-ignored “rainy day” fund, which can only be accessed during a fiscal emergency.

During his public event yesterday, Murphy praised parts of the budget where he and lawmakers saw eye-to-eye. But he also sharply criticized them for adding new spending items, while at the same time rejecting several of his proposed tax hikes, most notably a millionaires tax that would have raised an additional $536 million.

“The voices of the vast majority of New Jerseyans who support a millionaires tax were left in the ether,” Murphy said. “Instead, the budget that I was sent protects 19,000 millionaires and leaves the other almost 9 million residents to pick up the tab.”

Murphy had signaled his retreat on the millionaires tax in a series of public events before yesterday and had also foreshadowed the line-item vetoes by promising lawmakers in a letter that he was prepared to take “corrective action.” He once again pressed for the wealth surcharge and chided lawmakers for never putting it up for a vote in either house this budget season.

“I am on the side of putting the needs of New Jersey’s families ahead of the wealthy, ahead of privileged insiders, and ahead of powerful special interests,” Murphy said.

Among the spending Murphy removed from the legislative budget using his line-item veto authority — a power granted by the state constitution — was $38 million of a proposed $48 million lawmakers had inserted to fund local government grants to study shared-services opportunities. A $5 million grant for Cooper University Hospital, where Democratic South Jersey powerbroker George Norcross is the executive chairman, was also removed. Norcross and Murphy have been feuding over the state’s economic-development tax incentives, including those awarded to Cooper, but Murphy yesterday denied that argument played any role in the funding being removed from the FY2020 budget. He also said he would not sign a bill lawmakers wanted enacted by yesterday that would have extended the now-expired tax-incentive programs.

Other vetoes

Also deleted from the FY2020 budget was $4 million for the school-choice program and $500,000 for a proposed Camden workforce study. A $1 million appropriation for East Orange Hospital was also removed, but Murphy ended up signing a supplemental bill that will send the struggling facility a net $7.5 million in FY2020.

In all, the line-item vetoes added up to $48.5 million, a tiny fraction of total spending.

By holding an additional up to $235 million in reserve, Murphy is following a course set by former Republican Gov. Chris Christie in 2016 when he also impounded appropriations, which at the time resulted from a dispute over anticipated public-worker healthcare savings. He also removed nearly $300 million in spending using the line-item veto that year.

Sweeney said yesterday that he isn’t planning to override any of Murphy’s line-item vetoes. He also said he has no problem with Murphy’s decision to keep the spending on the sideline because he has full confidence in the revenue measures the governor has questioned.

“If his word is good, and as revenues come in, those program’s (funding) will be released, I’m OK with that,” Sweeney said.

But the Senate leader did push back against Murphy’s assertion that much of the state is looking for tax increases to fund new spending, saying New Jersey is a “moderate state” and that it was up to the Legislature to look out for the interests of the state’s 9 million residents.

“I know what side I’m on,” Sweeney said. “I want to lower property taxes. I want to make things fairer for people, and not just raise taxes.”

For their part, Republicans in the Legislature focused on new spending in the FY2020 budget, which pushes total appropriations up by more than $1 billion over the prior year’s spending plan.

“These spending increases are driving our residents to low-tax states,” said Assembly Minority Leader Jon Bramnick (R-Union). “Real reform is needed, and Republicans are ready to pass those reforms that would bring spending down.”

From NJTV News, watch Gov. Phil Murphy discuss and defend his budget and the response from Senate President Steve Sweeney.