Legislature passes $32.7B budget. Murphy expected to sign it next week

[[Updated:] GOP lawmaker slams ‘shameful’ add-ons. Democrats brush off criticism
Credit: (Governor’s Office)
Sept. 17, 2020: Gov. Phil Murphy announces a budget agreement with Democratic legislative leaders.

A $32.7 billion budget sustained by increased taxes and new borrowing is headed to Gov. Phil Murphy’s desk, thanks to majority Democrats who flexed their muscle to move the spending bill speedily out of both houses of the Legislature.

Murphy, a first-term Democrat, is expected to sign the budget and associated tax-hike legislation early next week, once a separate vote occurs to approve $4.5 billion in borrowing to align revenues with planned spending.

Among the tax increases to support the Democrats’ nine-month budget is a higher income-tax rate that will be levied on earnings over $1 million and up to $5 million.

Murphy has made that tax hike a top priority since taking office in early 2018, and it easily cleared both the Assembly and Senate on Thursday with the votes of majority Democrats who previously blocked it.

Democrats also provided all of the votes needed to pass separate pieces of legislation that will extend a tax surcharge paid by top-earning businesses in the state and increase a tax applied on what Health Management Organizations charge consumers for health insurance policies.

When debating the budget bill itself in both houses, the Democrats portrayed the tax hikes and the new borrowing as necessary evils needed to maintain spending on key programs and services amid the coronavirus pandemic.

Defending relief for middle class

“Our most vulnerable residents, the middle class, will get the relief that they truly need right now with this budget plan,” said Assemblywoman Shavonda Sumter (D-Passaic).

But Republicans faulted the majority’s budget and flagged spending items that were added at the last minute, including for pet projects that are often referred to as “Christmas-tree items” in Trenton.

“The majority party made no effort here to tighten the belt,” said Assemblyman Brian Bergen (R-Morris).

Counting a three-month stopgap budget that was enacted over the summer, year-over-year spending will surge to more than $40 billion, a record high for New Jersey while revenue losses linked to the pandemic are projected to persist through the middle of 2021.

Nearly $400 million in new revenue is projected from the millionaires tax legislation, which will raise the rate levied on income in the $1 million— $5 million bracket, from 8.97% to 10.75%.

Another $210 million will come from extending a surcharge levied on businesses with total annual profits over $1 million. It was supposed to begin phasing out this year but will instead remain in place through the end of 2023.

New taxes, borrowing

Increasing the tax applied on what Health Management Organizations charge consumers for health insurance policies, from 3% to 5%, is expected to generate another roughly $100 million in new revenue.

The Democrats’ spending bill also relies on a total of $4.5 billion in new borrowing — without voter approval — to raise additional revenue amid the pandemic. The New Jersey Constitution generally prohibits deficit spending, but it allows for exceptions such as helping the state respond to a war or major emergency.

Over the summer, lawmakers gave preliminary authorization for up to $7.2 billion in borrowing over the next nine months. A special panel of four lawmakers is scheduled to meet Monday to give final authorization for the $4.5 billion in debt that was factored into the Democrats’ budget legislation.

During the debate in the Senate on Thursday, Republicans took issue with a Democratic plan to establish a new tax-relief program that would see some families receive what are being billed as rebates next summer, on the eve of Murphy’s reelection bid.

The Republicans argued the tax relief of up to $500 should be provided sooner, given many families are struggling right now with job losses and may still be waiting for a check from the state’s backlogged unemployment system. Instead, no funding for the proposed tax-relief program was included the budget bill that went before lawmakers on Thursday.

“Think of what that money would mean to some of those people now, not a year from now,” said Sen. Bob Singer (R-Ocean).

Pet projects

Singer also took issue with funding for pet projects that made it into the final budget as education spending is being held flat and some school districts are seeing year-over-year reductions. A story published by NJ Spotlight News on Wednesday detailed some of that spending, including funding added for things like shade tree management and lake dredging.

Singer and other lawmakers also took aim at a $4 million allocation requested by Murphy for a youth golf program in Essex County.

“This is shameful,” Singer said. “We’ve all been around here. We know what a Christmas-tree list is. Some of these things are comical.”

But Democrats in the Assembly defended the spending added to the budget, saying it will also pay for things like food banks and health-care services that are being leaned on during the pandemic. They also pointed a finger at Republican President Donald Trump and his administration for not providing a bigger share of federal aid to New Jersey and other states.

“They missed the mark, and it is important that we rise from this pandemic with the hope of being in a better position,” said Assemblyman Benjie Wimberly (D-Passaic).

Murphy cannot give a signoff on the budget until after the $4.5 billion borrowing is put up for final approval on Monday. The governor had proposed even more tax increases in a budget plan he put forward in late August, but many were removed in a broader deal on spending that he cut with legislative leaders.

Still, Murphy signaled his approval of the spending bill and tax legislation during a media briefing on Wednesday, saying “all in all, I am proud of the budget that we have agreed upon.”

“This budget lives up to our most-important objective, preparing our state for a stronger, fairer, more resilient future,” Murphy said.

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