On Tuesday, Gov. Phil Murphy unveiled a nearly $45 billion spending plan for the budget year that begins July 1. That’s a 10% increase in year-over-year spending. Here is a breakdown of some of the key parts of his budget proposal, which now heads to the Legislature for approval before July 1.
No new taxes
Unlike prior budgets proposed by Murphy, there are no new taxes or tax hikes to directly support this latest proposed spending increase. A combination of money raised recently through borrowing, aid from the federal government and an overall brightening tax outlook has, at least temporarily, eased the pressure for new taxes. However, Republicans are arguing that other Murphy policies will lead to payroll tax increases scheduled to hit during fiscal year 2022.
An estimated 760,000 New Jersey families would receive direct payments being billed as tax relief later this year that could be worth up to $500. The relief payments would target single parents making up to $75,000 annually, and married couples with children making up to $150,000, under Murphy’s budget plan and legislation already passed by lawmakers last year. But the news is not so good for recipients of the state’s Homestead property-tax relief program. Budget documents indicate income limits will once again be held flat, and the size of Homestead benefits will also continue to be held effectively flat even as the average New Jersey property-tax bill rose to a record high of $9,112 last year. The budget also does not increase aid to municipalities, the second-biggest component of property taxes, for the 14th year in a row.
K-12 school aid
After a year of flat funding, the budget proposes a $578 million increase in aid to school districts, which would bring the total to about $9.3 billion. That should keep the state on track to fully fund public schools by 2025. Not all districts would see their aid increase; those deemed overfunded will likely lose some funding, although some of that may be made up by stabilization aid. The budget also calls for a $50 million increase for preschools, which would help 30 additional districts implement programs, and $25 million for extraordinary special education expenses in 500 districts. Murphy is also proposing $75 million for the Schools Development Authority to fund grants to help districts make emergency facility and system repairs.
Full pension payment
The budget calls for what actuaries consider the state’s first full pension contribution in more than two decades. The payment made in the fiscal year that begins in July would total $6.4 billion, counting dedicated revenues from the state Lottery. New Jersey has long shirked its responsibility to make a full pension contribution, leaving its pension system for public employees one of the nation’s worst funded. Since taking office in January 2018, Murphy had been following a gradual funding ramp-up plan established by his predecessor, Republican Chris Christie, but his budget proposal achieves a full contribution a year earlier than anticipated.
New health care benefits
Murphy called for expanding a prescription drug program for the elderly. His budget also seeks to continue expanding access to health insurance and called for a $25 million boost — to $150 million — in subsidies to help consumers pay for policies on the state’s new Obamacare marketplace, which has enrolled more than 270,000 people since it started in November. Murphy also proposed a new program to ensure all children have health care coverage, regardless of their immigration status, and allocated $4.7 billion in state funding for Medicaid to help with this process; the investment will trigger at least $10 billion in federal dollars.
Increases for health care facilities and the developmentally disabled
Hospital aid remains the single biggest health-related investment and Murphy’s budget continues recent trends, with slight pandemic increases. He proposed spending $269 million on the state’s charity care program, which helps pay hospital costs for those without insurance, with another $10 million for COVID-19-related costs and $9 million for big regional hospitals that have played a key role coordinating care. The budget also includes $211 million in quality incentive payments and $240 million to fund graduate medical aid. Murphy also identified nearly $100 million to enable agencies that work with disabled individuals to increase wages for staff and to cover pandemic-related costs.
Administration officials say they are not diverting money from the Affordable Housing Trust Fund, as previous governors have done and Murphy himself did in his first year in office. But it’s unclear how much of the money collected — which could total $60 million or more — will build new housing units because those details are not yet available. In his address, Murphy instead touted spending $20 million on the Housing and Mortgage Finance Agency’s Down Payment Assistance program to provide nearly 2,000 mortgages for first-time homebuyers to replace expiring federal funds. Another $5 million would streamline housing permitting and construction review processes at the state and local level in an effort to add to the supply of affordable housing.
Small increase for higher education
Administration officials said the budget boosts funding for higher education by $120 million, or nearly 5%, though it appears little if any of that will go to four-year colleges, except to cover the cost of benefits for professors and staff. The biggest item is $50 million for the Garden State Guarantee, a program that Murphy had proposed last year that did not get enacted, which would help low-income households eligible for the free community college tuition program to take two years tuition-free at a four-year public college instead. There is also a $20 million boost in operating aid for community colleges and a $3 million increase in the Educational Opportunity Fund that assists disadvantaged students. No increase in Tuition Aid Grants to low-income students is planned.
New economic recovery programs
State funding for a Main Street business relief program would be renewed in the new fiscal year, pushing the total two-year commitment up to $100 million. Another $25 million is being allocated to business-lending programs administered by the state Economic Development Authority. And Murphy is also calling for a $10 million investment in what’s being billed as Black and Latinx business seed-fund initiatives. However, a surcharge on top-earning businesses that was supposed to be temporary and was extended last year when Treasury was projecting major revenue shortfalls due to the pandemic is not being rolled back even though the state’s fiscal outlook has now brightened.
Murphy has once again proposed no fare increases for NJ Transit customers even as the agency’s overall operating budget is expected to rise in fiscal year 2022. But Murphy did not propose a dedicated source of revenue to fund the state’s mass-transit system, something that many transportation advocates have been calling for. The governor’s proposed budget would also continue the agency’s long-standing practice of raiding capital funds to support operations, although to a lesser degree than in prior years.
Clean energy and environment
Murphy is continuing the diversion of $82 million from the Clean Energy Fund to NJ Transit, most of which will be used to pay the agency’s energy bills. Many environmental groups have proposed ending those diversions, which over time have resulted in roughly $1.8 billion in utility customers’ money being spent on other non-related programs. The proposed budget also includes a $200 million appropriation out of the general fund to jump start the New Jersey Wind Port, a project the administration hopes will become the hub of an offshore wind manufacturing sector. Murphy also vowed to streamline the permitting process at the state Department of Environmental Protection without offering any specific details.
The prison population has been cut roughly by a third since Murphy took office. That will allow the state to close another facility — the William H. Fauver Youth Correctional Facility, formerly known as Mountainview, in Clinton Township — and “reduce overall spending in administrative and contracted” costs, according to the Budget in Brief. Murphy is proposing that the savings fund a number of new programs, including $5 million in internet infrastructure improvements to improve access for the incarcerated, $4.2 million for county youth services commissions to reduce juvenile delinquency and $3 million to fund nonprofits that facilitate re-entry.
New Jersey would close out the fiscal year in June 2022 with nearly $2.2 billion socked away if lawmakers enact Murphy’s budget plan unchanged. Those budget reserves would be roughly 5% of total planned spending. But instead of leaving even more money aside for the next downturn, Murphy is planning to spend down about $4 billion in surplus and other reserves that are expected to build up by the end of June.