With COVID-19 vaccinations underway and business restrictions slowly easing, Gov. Phil Murphy plans to propose a state budget plan Tuesday for what many hope will be a year of robust recovery from the coronavirus pandemic.
However, as New Jersey’s economic outlook appears to be brightening, Murphy faces pressure to make progress on some of the state’s most difficult fiscal challenges — while still managing the ongoing health crisis.
Also hovering over the budget approval process is the November gubernatorial election, which will see Murphy attempting to become the first Democratic governor in decades to win reelection to a second term.
To that end, demands to increase funding for key programs that can be hard to resist during an election year have already started piling up in recent weeks. Among them have been calls to provide more aid for public education, small businesses, New Jersey Transit, clean-energy programs and undocumented immigrants who are currently not eligible to receive unemployment benefits.
Meanwhile, concerns about high taxes — including New Jersey’s ever-rising property taxes — also remain a significant issue, especially with all 120 legislative seats on the November ballot.
The pressure points
And increasing costs related to public-employee pensions and debt, and a long-term commitment to fund corporate tax-incentive programs, are among other fiscal pressure points.
Murphy, who took office in early 2018, drafted three different state spending plans last year after the pandemic triggered revenue losses that piled up as the demand rose for spending on public health and other areas of the state’s response to COVID-19 infections.
To help ease the fiscal crunch Murphy convinced fellow Democrats who control both houses of the Legislature to increase taxes, including on millionaires and businesses, and to borrow billions of dollars without voter approval.
But the latest Department of Treasury revenue reports for the July 2020 to June 2021 fiscal year suggest the economic effects of the pandemic have not been as dire as once predicted by the Murphy administration, although some major sources of tax revenue, including the income tax, continue to lag the previous fiscal year’s totals.
New Jersey could also be in line to receive billions of dollars in additional aid from the federal government as a nearly $2 trillion COVID-19 relief measure is expected to come up for more serious debate in Washington, D.C in the coming weeks. Receiving such aid could free up more resources to spend on other needs that are unrelated to the pandemic.
Raiding the Clean Energy Fund
Last week, a group of environmentalists, transportation-policy advocates, labor officials and other organizations urged Murphy to use his fiscal year 2022 budget to undo long-standing raids on the state’s Clean Energy Fund. They cited, among other reasons, the urgent need to combat the effects of climate change, including in New Jersey.
“These are not just abstract lines in the budget. These are decisions to prioritize the health of our communities, of our workers, and obviously, of our climate, too,” said Berenice Tompkins, campaign organizer for Jersey Renews, a group which advocates for renewable energy and green jobs.
The advocates also pressed Murphy to live up to a promise to establish a dedicated source of revenue for NJ Transit, the state’s still beleaguered mass-transit agency.
Heavily reliant on rider fares, NJ Transit has for years been using funding diverted from capital and other resources to sustain its operating budget. A 2018 audit ordered by Murphy himself called the agency’s current funding model “inadequate, uncertain, and unsustainable.”
“I, like many of my neighbors, rely on public transit, especially buses, to get around,” said Tanisha Garner, president of Newark’s Ironbound Super Neighborhood Council. “If New Jersey Transit doesn’t receive appropriate funding, I fear that we may lose adequate services, as well as our buses, and our ability to move (around).”
Those high property taxes
Murphy is putting forward his latest state budget plan at a time when New Jersey property-tax bills remain at an all-time high and many residents remain unemployed or have seen their hours reduced amid the health crisis.
New figures released by the Department of Community Affairs earlier this month indicated the average property-tax bill rose last year above $9,000 for the first time ever in New Jersey, to a total of $9,112. In seven of the state’s 21 counties, the average property-tax bill is more than $10,000.
Taxes are also a major concern for leading business-lobbying groups, especially after a surcharge on top-earning businesses that was supposed to be temporary instead was made permanent last year to help bring in more cash for what at the time was a COVID-19-strained budget.
Throughout his tenure Murphy has pushed for tax hikes to help fund increased state spending on things like K-12 education, mass transit and worker pensions, but Michele Siekerka, president and chief executive officer of the New Jersey Business & Industry Association, said that has left New Jersey “taxed out and maxed out.”
With a sizable budget surplus and a potential for significant federal aid, Siekerka said tax hikes should not be necessary to sustain the 2022 fiscal year spending plan. She urged Murphy to be strategic about how the state’s budget dollars are deployed, including as many tax sources continue to outperform projections. And she urged him to also pursue spending reforms that could produce long-term savings.
“This is our opportunity to be really smart,” Siekerka said.
Bipartisan push for small-business aid
For their part, Republican lawmakers have led a fight in recent months for more state resources to be devoted to supporting small businesses, which have faced some of the biggest hardships during the pandemic. Democrats in the Senate have since joined that effort, and a bipartisan bill was introduced earlier this month that would allocate $300 million from the budget’s General Fund for grants and loans to small businesses and nonprofit organizations.
Sen. Steve Oroho (R-Sussex), who serves on the Senate Budget and Appropriations Committee, said “there’s no legitimate argument that we can’t afford this legislation.”
Murphy spokesman Darryl Isherwood declined to comment on any of the specific issues that have been raised in the run-up to tomorrow’s budget address. But he said in a statement that Murphy’s administration is, “committed to fostering our pro-growth, progressive values in this budget while at the same time continuing to bolster our small businesses, which are in dire need.”
“We look forward to working with all stakeholders in crafting a solid budget that works for all New Jerseyans,” Isherwood said.