In the aftermath of the $32.7 billion tax-and-borrow budget put into place to finance state government for the next nine months, it’s become clear that the fiscal 2021-2022 spending plan will more than ever before shape not just the economic landscape but the political as well.
Whatever accommodations reached between Gov. Phil Murphy and the legislative leadership to impose his long-sought millionaires tax and borrow more than $4 billion without voter approval will come into sharper focus when he submits his election-year budget next March.
And early indications are that public-employee wages and benefits will be a major — if not the major — thrust of legislative effort toward cost containment and long-term fiscal stability.
Read the tea leaves floating in the comments by Senate President Steve Sweeney (D-Gloucester):
“We know budgets are about shared priorities … as a direct result of this year’s budget talks, the governor has agreed with us on the need for fundamental reforms to balance future budgets, to provide savings for taxpayers and to make government services more efficient … there are many reforms we can do next.”
Those remarks are Sweeney’s introductory overview and are an unmistakable sign that in the negotiations with the governor over the current budget, Sweeney and Assembly Speaker Craig Coughlin (D-Middlesex) extracted concessions from Murphy to dive deeper into the cost of government, identifying it as a fertile area with potential to achieve significant savings.
Loosely translated into the language of legislative politics, “The governor has agreed with us on the need for fundamental reforms to balance future budgets to provide savings for taxpayers,” means: “We gave the governor his millionaires tax and unprecedented borrowing authority and left his office with a pocketful of commitments for fundamental changes in the way government spends.”
Sweeney on way to getting his way
For Sweeney, the moment must have been particularly sweet — a significant step by the administration toward taking his beloved “Path to Progress” study and recommendations seriously.
His public-pension system reform proposals have long been anathema to employee unions who’ve consistently found an ally in Murphy. The governor’s apparent acquiescence in opening a serious debate over the pension system is a break from his previous staunch support for the union point of view — no diminution of benefits, no increase in employee contributions and requiring the state to contribute its mandated share to the system.
Sweeney advocates a fairly dramatic shift in the pension system, moving away from a fully defined benefits plan to a hybrid approach, utilizing a method similar to a 401(k) program for new employees. He also has recommended reforms in the manner in which the pension liability is amortized and including certain infrastructure assets in the system to produce additional nontax revenue.
Another suggestion that directly impacts public employees includes capping at $7,500 payments for accumulated sick leave, replacing designated state holidays with floating leave days and demanding that government ensure that employees are not using loopholes in health care premiums to benefit unfairly from the system.
Revenue forecasting by committee
Sweeney also wants revenue forecasting — the estimates of the amount of taxes the state can anticipate — taken away from the sole discretion of the governor and conducted by a consensus panel to prevent arbitrarily inflating or undercounting.
He’s returned also to one of his favorite money-saving themes — countywide consolidation or regionalization of K-12 school districts, a move he argues has a potential for saving millions of dollars in property taxes.
Sweeney has clearly seized the moment, leveraging his support for the millionaires tax and the borrowing plan to promote his “Path to Progress” agenda.
He has done so under the cover of responding to the unprecedented economic damage inflicted on the state by the COVID-19 pandemic.
Only under such dire circumstances — business and school closures, soaring unemployment, dramatic drop-off in tax revenue — would he and Coughlin convince their members to raise taxes and fall further into bonded indebtedness.
He’s taken the opportunity to contend that dealing with and hopefully emerging from the pandemic is the proper prelude to undertaking the longer view of the state’s fiscal condition and enacting programs and reforms to steady the ship and equip it to withstand future upheavals.
Sweeney and Coughlin will expect Murphy to stand by whatever agreements they reached during the negotiations over the current budget and it will fall on the governor to convince the solid support he’s enjoyed among public employee unions that the time has arrived for serious, in-depth debate over the entire benefits system — salaries, pensions, health care, sick leave, retirement severance and conditions of employment.
In the 2021 election year, it may well be a deeply difficult conversation for Murphy to have with those in the labor movement who’ve stood resolutely by him and who gave their support both organizationally and financially.
It is, of course, impossible at this point to predict how far the state may have come in its recovery by next spring or whether, in fact, it is still dealing with the effects of the pandemic.
It is clear, though, that in the midst of the gubernatorial and legislative campaigns, state spending and the role of public employees vis-à-vis that spending will be the dominant issue.