Murphy Administration Could Soon Unfreeze Some Frozen Budget Funds

John Reitmeyer | October 4, 2019 | Budget
State Treasury is indicating that some appropriations impounded by Gov. Phil Murphy amid budget disagreements could be released
Credit: NJTV News
Gov. Phil Murphy, left, and Senate President Steve Sweeney

The first quarter of the state’s fiscal year has gone by with dozens of appropriations that were approved by lawmakers still being held “in reserve” by order of Gov. Phil Murphy.

But the Murphy administration is now saying that at least some of the spending items the governor froze earlier this year amid a messy budget dispute with the Legislature could soon be released.

Among the appropriations left in limbo were $105 million in special aid for distressed municipalities, and $130 million that lawmakers had designated for things like aid to state colleges and funding for a South Jersey-based cancer program.

‘Under-appropriated appropriations’

Murphy, a Democrat, used an executive order to impound a total of $235 million in spending in late June, after warning lawmakers their spending bill for fiscal year 2020 was flawed. The administration also detailed its misgivings in bond documents issued late last month, pointing to “unachievable savings” and “under-appropriated appropriations” that were included in the final budget the governor signed into law to avoid a government shutdown.

But Senate President Steve Sweeney (D-Gloucester) has questioned Murphy’s motives for the impoundment and suggested political disagreements involving the two men may also be playing a role in the budget decisions. And with the spending still sidelined after the first quarter of the fiscal year, which began on July 1, Sweeney is threatening to call state Treasurer Elizabeth Maher Muoio before the Senate Budget and Appropriations Committee to give lawmakers a more thorough explanation.

“I’m not letting it go,” Sweeney said yesterday during an interview.

Later yesterday, Muoio issued a statement indicating legislative leaders have been told that, based on “preliminary data,” at least some of the reserved funding could soon be released.

“In the meantime, we have asked every state agency to keep us informed of any imminent needs or hardships that might arise in relation to spending items under their purview that have been placed in reserve,” Muoio said.

After feuding with lawmakers for months over whether the state should establish a millionaires tax sought by Murphy, the governor used line-item veto powers authorized in the state constitution to take $50 million in appropriations out of the budget bill he received from the Legislature in late June. In addition, Murphy put the $235 million in spending in reserve using the executive order, as he also enacted the overall $38.7 billion spending plan for FY2020.

$105 million for distressed municipalities still on hold

The largest spending item that’s been put on hold is the $105 million earmarked for transitional aid to distressed municipalities. That left only $10 million available for the transitional-aid program. The impounding of those dollars drew a quick response from credit-rating firm Moody’s Investor Services, which in July labeled the delaying of the aid a “credit negative” for the communities that are in line to receive it. (Past recipients have included Atlantic City, Camden, Paterson and Trenton, among others.)

Dozens of other spending items are also impounded under Murphy’s executive order, including some funding for four-year colleges like Montclair State University, Stockton University, and Rowan University’s Cooper Medical School. Money for Essex County Jail programs and funding for local traffic studies, arts and agriculture programs are among other items that remain on hold.

Murphy’s executive order cited concerns about several savings initiatives that were included in the FY2020 spending bill that lawmakers sent him in late June, including planned projections related to a proposed state Department of Corrections consolidation initiative. The recently issued bond documents said those concerns caused the administration to label the $235 million that’s being held in reserve as “at-risk” appropriations.

But Sweeney — a loud opponent of the millionaires tax — issued a news release in July that first raised the issue of politics also being at play.

Sweeney cites negative impact of frozen funds

During the interview yesterday, Sweeney suggested students at Stockton University are being impacted as a dormitory project in Atlantic City remains on hold. Federal matching funding that could go to a transportation-research program at Rowan University is also being jeopardized as the state appropriation for the same program remains sidelined, the Senate leader said. And the funding for the cancer program, which is based in Camden, also remains in reserve, he said.

“People with cancer can wait until we unfreeze it?” Sweeney asked.

“I’m going to be left with no choice pretty soon but to call the treasurer in before the budget committee,” he added.

The impounded appropriations can be released only when the treasurer is confident the state isn’t in danger of eroding its budget reserves, which total nearly $1.3 billion, according to the executive order. And in recent weeks, there has been some good news related to the health of the budget.

Savings from Horizon health benefit contract

For example, officials from Horizon Blue Cross Blue Shield of New Jersey said earlier this week that $200 million in annual savings will result from a new contract it signed with the state to administer health benefits programs for an estimated 600,000 active public workers and retirees under the age of 65. Treasury’s latest revenue figures also showed total tax collections came in slightly above targets during the first two months of the fiscal year.

But complete first-quarter revenue data have yet to be released by Treasury, and officials have warned against using the July and August figures as a “bellwether” for the full fiscal year since none of the state’s major sources of revenue come due during those two months.

Moreover, savings from the Horizon deal — which company officials attributed to an increased focus on data and analytics — were already baked into the FY2020 budget. Some of the same $200 million in calendar-year savings will also go to local-government budgets and not to the state itself, officials said.

Still, Muoio, in yesterday’s statement, said Treasury is “continuously monitoring the state’s fiscal situation, including the many questionable savings initiatives that the Legislature included in the budget.”

“While we are not in a position to offer specifics at the moment, we have indicated to legislative leadership, that based on preliminary data, we hope to be able to release some of the reserve funding soon,” she said.

The treasurer provided no additional details about which items could be released first or when.