A three-month extension of the state’s fiscal year has defused much of the budget tension that typically consumes Trenton in late June, but lawmakers are still facing a deadline to pass an important supplemental spending bill.
The adoption of legislation covering spending during July, August and September is required under a law Gov. Phil Murphy enacted several months ago that lengthened fiscal year 2020 as part of the state’s response to the coronavirus pandemic.
Murphy, a first-term Democrat, has already endorsed a plan drafted by the state Department of Treasury that calls for $7.6 billion in spending between July 1 and Sept. 30. A draft of the supplemental spending bill needed to enact that plan has already been given to lawmakers, a Treasury spokeswoman confirmed last week.
While lawmakers have yet to do their part by formally introducing a supplemental spending bill, staffers say they do intend to do so before the end of the month.
What remains to be seen is whether the Democratic-controlled Legislature will advance Murphy’s budget plan unchanged, or introduce a different version to send to the governor that includes noteworthy revisions.
New Jersey generally operates under a July 1 to June 30 fiscal year, and, according to the state Constitution, a balanced spending bill must be enacted into law by the governor and lawmakers each year by July 1. If they don’t come to an agreement before the deadline, money cannot be drawn from the Treasury, resulting in a government shutdown.
New fiscal-year budget set for Sept. 30
But this year, the deadline to pass a new fiscal-year budget has been pushed back to Sept. 30 as part of the law Murphy enacted in the wake of the pandemic that also delayed the deadline for submitting state income-tax payments, from mid-April to mid-July.
The original spending bill for FY2020 provided appropriations for a 12-month fiscal year, and the extension law passed in April said “any additional spending required to support the operations of the State from July 1, 2020 through September 30, 2020, shall be made through the enactment of a general law” that provides for supplemental appropriations.
That means, even though there’s no threat of a looming government shutdown on July 1, the typical deadline for reaching a deal on state spending is still an important one this year now that FY2020 has a fifth quarter.
Any spending that is not authorized in existing budget language “requires legislative action,” said Treasury spokeswoman Jennifer Sciortino.
Murphy’s proposed three-month budget plan calls for $7.6 billion in spending over July, August and September. The budget plan, which Treasury unveiled on May 22, also leaves a surplus of $494 million for the start of fiscal year 2021.
Over $2 billion in spending on hold
Under the administration’s plan, more than $2 billion in spending that would typically occur during the first quarter of a state fiscal year is being deferred, at least into October, when the abbreviated FY2021 is slated to begin.
The deferrals would help offset projected revenue losses attributed to the pandemic, and limits on economic activity that have been enacted to help slow the rate of new infections. Among the bigger spending items slated for deferral are a quarterly pension contribution and a K-12 school-aid payment, according to Treasury’s plan.
Spending on popular property tax-relief programs, including the Homestead and Senior Freeze programs, would also be impacted by Murphy’s plan, something that has drawn criticism from lawmakers. Homestead relief that was supposed to be paid as a direct credit on property-tax bills last month was already cut by the administration in response to revenue losses from the pandemic.
Won’t rely on long-term borrowing or tax hikes
The administration’s three-month spending plan does not rely on any revenue from long-term borrowing, or from a series of tax hikes that Murphy originally wanted to enact on July 1 but have since been put on hold, at least for now.
Treasury is predicting the state will collect $7.76 billion in revenue in July, August and September. But fiscal experts from the Office of Legislative Services (OLS), the nonpartisan research division of the Legislature, are projecting $7.86 billion in revenue will be collected over the same three months.
The more optimistic forecast from OLS could give lawmakers grounds to push for a restoration of funding for at least some of the programs that Murphy has put on the chopping block. Meanwhile, a recently updated OLS forecast for the original 12 months of FY2020 was also more optimistic, with OLS estimating $37.1 billion would be collected through the end of June. Treasury predicted $36.7 billion would be collected through the end of June in its own updated forecasts.
Asked about the status of the FY2020 supplemental spending bill last week, Kevin McArdle, a spokesman for the majority Assembly Democrats, said the goal for lawmakers is “to pass the legislation before June 30.”
Meanwhile, some lawmakers have also begun to air concerns about a 2% salary raise for state workers represented by the Communications Workers of America labor union that is due to go into effect after July 1.
During a media briefing held in Trenton earlier this week, a reporter asked Murphy if it would be reasonable to put a hold on scheduled public-worker pay increases given there have been record job losses in the private sector in recent weeks.
Murphy didn’t address the issue directly, but he said, “I do think this is a time when we’re all going to have to give of ourselves.”