Deadline looms as budget work done in private

Public hearings may get started this week on a budget unlike any other. NJ has billions in extra money to spend thanks to tax surpise
Credit: (Edwin J. Torres/ Governor's Office)
File photo: L to R: Assembly Speaker Craig Coughlin, Gov. Phil Murphy and Senate President Steve Sweeney

With a little over a week left before the state’s constitutional budget deadline, lawmakers have yet to send to Gov. Phil Murphy a spending bill for the new fiscal year that begins on July 1.

That means a lot will happen over the next week or so that could have a major impact on New Jersey and its residents in several key areas including tax relief and spending on public education. The action could start as early as Monday, a day that lawmakers had previously targeted for formal introduction of the fiscal year 2022 spending bill.

This year, a surprise cash windfall is helping the state amass a projected $10 billion surplus headed into the new fiscal year, leaving lawmakers in the unlikely position of having plenty of resources available to help cover the state’s spending priorities.

New Jersey has also received a new tranche of COVID-19 relief from the federal government that totals more than $6 billion, which has further bolstered the state’s fiscal outlook.

WATCH: COVID-19 relief funds

READ: NJ has an extra $10 billion. The question is what to do with it

Here’s are some of the key issues to keep an eye on as a new budget comes together in Trenton in the coming days.

Tax relief: Murphy and lawmakers were already planning to give special tax rebates to thousands of residents this summer because of the economic hardships triggered by the coronavirus pandemic. But the state’s improved fiscal outlook could mean even more tax relief can be funded in the new budget, especially with Murphy seeking reelection and all 120 legislative seats also on the November ballot.

Murphy in recent days has singled out the Homestead program, which provides property-tax relief credits to thousands of senior, disabled, and low- and middle-income homeowners. For over a decade, governors and lawmakers have been shortchanging these benefits by using outdated property-tax bills as the baseline for calculating individual credits.

Debt relief: New Jersey is already one of the nation’s most-indebted states. And after borrowing nearly $4 billion last year to offset projected revenue losses that never materialized, the Murphy administration and majority Democrats in the Legislature have faced a heap of criticism, including for leaving taxpayers with the long-term interest costs for those COVID-19 bonds, which cannot be paid off early.

This year, lawmakers have pressed the Murphy administration to identify other state debt that can be retired early and have repeatedly expressed an interest in doing so. Paying off debt early would likely produce long-term budget savings, especially if debt with a higher interest rate than the less than 2% true-interest cost of the COVID-19 borrowing issue is prioritized for retirement.     

Pension funding: Murphy’s original proposal for the fiscal year 2022 budget calls for contributing more than $6 billion to New Jersey’s public worker pension funds. That sum would set a record for the state and serve as the first “full” payment, as calculated by the state’s actuaries, in more than two decades.

But even with that planned record-setting contribution, New Jersey still has a long way to go to offset its years of skipping or making only partial payments into the pension funds, which cover the retirements of an estimated 800,000 workers and retirees. Using a portion of the state’s one-time cash infusion to fund an even larger annual pension payment would ease some of the burden on future budgets due to the way the state calculates its significant unfunded pension liability.

Education spending: One area of the budget that has grown significantly since Murphy, a Democrat, took office in early 2018 has been the allocation for  “formula aid” for K-12 schools. The governor’s original budget proposal for the 2022 fiscal year calls for another big year-over-year increase, totaling nearly $580 million. Despite that increase, some school districts would still be slated to lose state aid, and schools as a whole would remain “underfunded,” according to New Jersey’s current education spending laws.

As the state’s coffers have overflowed in recent months, many groups have called for holding all schools harmless this year and for education spending to be boosted in other areas, including special education.

Transparency/equity: New Jersey generally receives decent grades for overall budget transparency, thanks in part to the routine posting of spending bills and other detailed budget documents online. But some key events in the state’s budget-approval routine take place largely behind closed doors, and often at the very last minute. This year has been no different. High-level talks between legislative leaders and the governor’s office are not occurring in public, and a final spending bill was not introduced before the start of the last full week before the budget deadline, leaving little time for a robust public debate.

The current cadre of Democratic leaders didn’t invent this practice, but it has come under increased scrutiny in recent years, including during a broader public debate about equity and systemic racism across the country. While there is diversity on the legislative budget committees, final calls on the budget are made by Murphy, Senate President Steve Sweeney (D-Gloucester) and Assembly Speaker Craig Coughlin (D-Middlesex), all white men.

READ: Will the public get a shot to say how $11 billion windfall gets spent?

WATCH: Moratorium on shut-offs to end but customers will be given grace period to pay bills

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