Inside NJ budget, words matter as much as numbers

In moves rarely noticed by the public, New Jersey lawmakers use language to make cuts, lower benefits and more
Credit: Screenshot from YouTube.com
Oct. 29, 2020: Gov. Phil Murphy examines a budget document before signing it.

The word “notwithstanding” appears more than 480 times across all 251 pages of the state budget signed by Gov. Phil Murphy last week.

In almost all cases, the word serves as a signal that what comes after it is additional language that will legally override spending or other policies already written in state law.

It’s through budget language, for example, that lawmakers and governors divert millions every year away from a program to promote reduced energy consumption and renewable energies as New Jersey already experiences the painful effects of global climate change.

By simply writing “2006” for the year into one formula, lawmakers artificially keep in check how much the state spends on the Homestead property-tax relief program, which in turn, holds down the size of tax credits that go out to thousands of homeowners struggling to cover record-high property tax bills.

But budget language can also be used in other ways by lawmakers as they compile a final spending bill. They can add or delete words that in effect reduce or block cuts and blunt policy changes that were part of the original budget recommendation from the governor.

In the budget just signed into law, lawmakers deleted language to prevent diversions from the Clean Communities and State Recycling funds that were roundly criticized by environmentalists.

Even the governor can request changes to his original budget proposal at the last minute that often draw little to no attention: Last week Murphy used budget language to secure $600 million in additional spending on state transportation projects, according to budget documents.

Nearly all of that escaped public notice this year, as in years past, demonstrating that when it comes to reviewing the state budget, the fine print can be just as important and impactful as any of the numbers.

What makes this possible

The reason the budget can be used to short-circuit other state laws or regulations lies in a section of the New Jersey Constitution on annual spending and the budget.

Known as the Constitution’s appropriations clause, it generally requires all spending and revenues to line up each year and prohibits deficits. It also means any spending that would take the budget out of balance would make it run afoul of the Constitution, even if that spending is called for in another state law.

To be sure, many of the policy changes triggered in the budget by using the word “notwithstanding” are often arcane or have little material effect on residents or programs they rely on. But others are far more impactful.

Property-tax relief shortchanged again

One of the best examples of how the budget’s fine print can hit the average New Jersey resident is the way it has been used to artificially hold flat Homestead property-tax relief credits, which go annually to thousands of seniors, disabled and low- and middle-income homeowners, by keeping the year 2006 as the baseline for calculating the credits.

The practice, which began in response to revenue losses in the 2007-2009 Great Recession, will keep going for at least another year thanks to the following language in the new budget: “Notwithstanding the provisions of such laws to the contrary … These benefits listed pursuant to this paragraph will be calculated based on the 2006 property tax amounts assessed or as would have been assessed on the… principal residence of eligible applicants.”

Using 2006 — when property-tax bills were on average nearly 40% lower than today’s — as the baseline for the Homestead program frees up money in the budget for other purposes. But it also comes at the expense of the Homestead program’s recipients.

When it came up for discussion during legislative budget hearings in early September, state Treasurer Elizabeth Maher Muoio suggested reversing course at this point would be very costly.

“I believe if we were to fully fund (benefits) based on the most up-to-date data, the Homestead Benefit (program) would cost us a billion dollars,” Muoio said. Instead, the program’s line item will remain less than $300 million, according to budget documents.

Raids on Clean Energy Fund continue

Similar budget language has been used to allow for the continued raiding of the state’s Clean Energy Fund.

This year’s fund raids include more than $61 million that will go to New Jersey Transit thanks to the following budget language: “Notwithstanding the provisions of any law or regulation to the contrary …  there is appropriated $61,566,750 from the Clean Energy Fund for utility costs associated with New Jersey Transit Corporation operations.”

Another section of the budget  transfers an additional $40 million from the Clean Energy Fund to the General Fund.

The Clean Energy Fund is supposed to support efforts to switch to less-polluting methods of generating electricity like solar systems and to promote programs that lead to overall reduced energy consumption. Utility customers across New Jersey pay into the fund on a regular basis via a “societal benefits” surcharge on their monthly utility bills.

The raiding of the Clean Energy Fund began on a regular basis during the tenure of former Republican Gov. Chris Christie, but the practice has continued under the Democratic Murphy. And just as the language impacting the Homestead program is now an established feature of the budget, the Clean Energy diversions are likely to continue, especially as the state is now dealing with a new round of revenue losses triggered by the coronavirus pandemic.