When Gov. Phil Murphy partially lifted his impoundment directive and released $114 million in state aid last week, he placed his action in the context of better than anticipated revenues that maintained a healthy reserve as a hedge against any potential economic slowdown.
While the governor’s explanation is a valid one and indicates the state is no longer skating on thin fiscal ice, closer examination suggests it may also be the first move toward an accommodation with Senate President Steve Sweeney (D-Gloucester) over the fate of the embattled Economic Development Authority and its tax incentive program.
The funds released by the governor constituted slightly less than half of the $235 million he ordered frozen in June, infuriating Sweeney who accused the governor of singling out South Jersey for a disproportionate share of the withheld money. The executive action, Sweeney said, was retribution — a part of the governor’s ongoing political dispute with South Jersey political interests.
The governor, he said, had punished the elderly, cancer patients, higher education and taxpayers in general by a spiteful act, which the Senate president characterized as “Bridgegate on steroids.”
At the same time, Sweeney threatened to call State Treasurer Elizabeth Muoio to testify to a Senate committee and explain the rationale for the impoundment.
The South Jersey connection
Freeing the funds comes at the same time both Murphy and Sweeney said discussions were ongoing to resolve the impasse over legislation to extend the EDA, which has come under severe scrutiny over its past approvals of billions in tax incentives granted to companies with ties to South Jersey political leader George Norcross.
Despite testimony given to a task force created by Murphy that the EDA was subject to political influence and acted favorably on flawed or misleading grant applications, the Legislature approved extending the tax incentives unchanged.
Murphy conditionally vetoed the bill in August, returning it to the Legislature with major revisions, most prominent of which is limiting the size of the incentives.
Sweeney has allowed the veto to languish in the Senate rather than attempt an override, opening a path for a compromise with the governor rather than a continuing stalemate and the absence of a program to attract business expansion and development.
Could the partial lifting of the impoundment and the near-simultaneous expressions of optimism concerning renewal of the EDA be a coincidence?
Short answer: No.
Letting both sides win
At this level of political maneuvering, coincidences are carefully planned, a part of a larger strategy which, if implemented, produces a victory for both sides.
Sweeney, no stranger to deal-making, reaching accommodations and striking compromises, operates exceedingly well in this environment.
A substantial portion of the funds released benefit municipalities, social programs and health and education institutions that occupy the land mass south of Trenton (Sweeney country, in other words).
It is more than likely that freeing the funds and the EDA legislation are, indeed, the first moves toward reaching a compromise and represent something of a breakthrough in the testy relationship between the administration and Sweeney.
The two have been at odds — often bitterly so — almost from the outset of Murphy’s term, clashing on budget and tax issues, public pension reform, and school aid.
Trenton’s transactional politics
Budget deadlocks brought the state to the brink of a shutdown twice, confrontations from which Sweeney emerged the winner while Murphy appeared unable or unwilling to engage in the kind of transactional politics upon which legislative victories are founded.
Critics described Murphy and his staff as political naïfs, unschooled and inexperienced in the crosscurrents of legislative-executive relations, failing to understand that the Senate president, for instance, was a formidable co-equal and, if the administration was to be successful, Sweeney’s power must be acknowledged.
Murphy’s decision to impound the funds was the first genuine example of using executive branch muscle-flexing to tee up a negotiated settlement, essentially sending a message to Sweeney that looking favorably on the EDA reform legislation — a result Murphy desires — hinged on turning on the state aid spigot for South Jersey — a result Sweeney desires.
It is significant, also, that Murphy released about half the funds he initially impounded, holding out the promise that the remainder would be forthcoming in direct relation to progress on the EDA bill.
For administration watchers — that cadre of the State Street crowd known as “observers” — Murphy’s move impressed them as his understanding (overdue, perhaps) that playing the inside game achieves results and the outside game allows one to boast about it.
He may get the hang of this governor thing yet.