Op-Ed: Crush the Curve, Not the Economy

Michele Siekerka, Tom Bracken | September 4, 2020 | Budget, Opinion
Gov. Phil Murphy’s $40.1 billion budget simply does not reflect the stark reality of our times 
Michele Siekerka and Tom Bracken

As the summer of COVID-19 comes to a hollow end for many beleaguered businesses, Gov. Phil Murphy is proposing a $40.1 billion budget that simply does not reflect the stark reality of our times.

Instead of keeping costs down for our taxpayers already struggling in this economic downturn, Gov. Murphy is raising taxes and making New Jersey businesses less competitive.

Instead of holding the line on spending, like both governments and taxpayers do when times are tough, he has proposed spending $1.4 billion more than the prior year and $5.4 billion more than the budget three years ago before he took office.

Instead of taking the opportunity to pursue the structural reforms that are so desperately needed to right-size our state budget and make New Jersey more affordable, the governor offers more of the same tax-and-spend policies that have brought us to the edge of the fiscal cliff in the first place.

New Jersey businesses have already sacrificed their revenues and livelihoods to prevent the spread of coronavirus during prolonged shutdowns of their operations. Business owners have tapped their own savings and taken on new debt to keep from going under completely, and to continue paying their employees what they can.

New taxes on the very same businesses that have already given so much, and are the only ones that can drive our future recovery, is inconceivable and totally unwarranted.

Fiscal responsibility also dictates a budget that cuts spending through structural reforms, which should include fixing an overly generous pension and benefit system.

Instead, the proposed budget unnecessarily supports a large surplus that will do nothing to kick-start the economy and is unnecessary. To which we ask: Why borrow money to put into an account that will actually earn less than the borrowing cost — especially when you have a court-approved “line of credit” to use, if needed, that has no cost if you don’t access it?

A fiscally responsible budget

We are calling for a fiscally responsible budget, highlighted by the following:

  • Eliminate the need to increase taxes by a billion dollars and reduce the need to borrow $4 billion.
  • Eliminate new state spending in the midst of a global economic downturn.
  • Enact structural reforms to right-size our state budget.

How do we get there?

  • Reduce the $2.2 billion surplus to what it was last year for a $500 million savings. During this crisis, the surplus actually grew, so you can extrapolate that the new taxes and/or borrowed funds are not for new spending or to help anyone, but merely to put more money away for a potential crisis when we are already in that crisis right now.

A larger surplus is also less necessary due to the court-approved $9.9 billion in bonding authority that this budget can still tap if a need arises.

  • Cut the fiscal year 2021 public employee pension contribution.

A case can be made to eliminate any contribution this year due to the need to have spending priorities that will restart our economy. But at a minimum, cut the contribution to $3.7 billion for a $1.2 billion savings. This would hold New Jersey at fiscal year 2020’s seven-tenth pension payment, which allows the state to maintain the progress it has made. This is still higher than any previous administration’s contribution.

When it comes to the pension contribution, we should remind ourselves that whatever dollar figure is settled on will still go toward a broken and unsustainable system, which will continue to rely on new taxes and borrowing. New Jersey needs to do better.

  • Eliminate hundreds of millions of dollars in new spending, as found in the baby bond proposal.
  • Find no less than hundreds of millions of dollars in savings in Senate President Steve Sweeney’s Path to Progress plan, including pension reform and further health reform. It’s in there, if the political will can be found to make it happen.
  • Move our business restart forward immediately and bring more workers back to work. The projected FY2021 sales tax revenue, often a good indicator of the severity of the economic crisis caused by COVID-19, is almost exactly identical to sales tax revenue of FY2020. All things being equal, the advanced restart should help fill the remaining income tax and corporate tax revenue gaps with overall business revenue.

At the end of the day, the governor’s proposed FY2021 budget includes $5 billion in irresponsible new revenue to balance the budget ($1 billion in new taxes, plus $4 billion in borrowed funds).

In contrast, taking these aforementioned steps generates enough savings to reduce a reliance on fiscally irresponsible revenues, eliminate the tax increases and significantly reduce the bonding.

Let’s face it — New Jersey has crushed the COVID-19 curve. Let’s not continue to crush our economy. Let’s pass a budget that will restart it.