Gov. Phil Murphy unveiled his budget plan on a sweltering Rutgers football field facing socially-distanced lawmakers, officials and news media. He proposed a COVID-19 driven, $32.4 billion budget proposal for the rest of the fiscal year. It would borrow $4 billion and raise more than $1 billion in fees and taxes on millionaires, cigarettes, yachts and gun permits.
The governor explained the pandemic lockdown’s crushed tax revenues, confronting the state with an estimated $5.6 billion budget deficit.
“Beside setting off an unprecedented public health crisis, this pandemic also unleashed an economic crisis,” Murphy said. “1.4 million have filed for unemployment, but we cannot send the false hope things are going to simply snap back to the way they were before.”
Murphy’s proposal finally completes his original fiscal year spending plan that was put on hold when the pandemic surge sent the state into lockdown in the spring. It restores the Senior Freeze and Homestead Rebate programs that benefit senior, disabled, and low-income homeowners and leaves school funding and municipal aid flat.
It also makes a massive $4.9 billion payment into state public worker pension system. And, it borrows an idea from Sen. Cory Booker — the creation of Baby Bonds, a $1,000 deposit for each qualifying newborn that they can use at age 18.
“And as this child grows, so too will the value of this bond to help pay for things like college, to help ultimately to make a down payment on a home or start a small business,” Murphy said.
The governor again called for more federal aid from the president and Senate Majority Leader McConnell — an unlikely event. So Murphy’s pushing to borrow $4 billion, but doesn’t plan to spend it all. He’d set aside half of the money for a COVID-19 surge.
“This budget envisions a closing surplus of more than $2.2 billion, a much needed cushion against revenue shocks from a second wave,” Murphy said.
The budget does require state departments to cut $1.25 billion in spending. This is Murphy’s third attempt to generate $390 million by raising the so-called millionaire’s tax from 8.97% to 10.75% on gross income between $1 million and $5 million. That’s the rate already paid on income over $5 million.
“I would urge those who would pay this tax to see it this way: we’re asking you to sacrifice pennies on your top dollar to ensure every New Jerseyan has the same opportunity to succeed that you did,” Murphy said.
Democrats in the Legislature have blocked Murphy’s previous efforts to hike taxes on New Jersey’s wealthiest taxpayers.
Senate President Steve Sweeney expects tax revenues might be better than the governor predicted, but said nothing’s off the table.
“I’m not excited about taxes, period, but you can’t rule anything out right now. That would be irresponsible. We’ve never been in a place like this, so we’ve got to look at everything,” Sweeney said.
Items expected to prompt protests include the proposal to let a temporary 2.5% Corporate Business Tax surcharge become permanent. It’s a move the business community calls “irresponsible.” Plans to raise taxes and fees on firearms will draw fire from Second Amendment advocates.
Republican lawmakers panned the tax hikes and borrowing.
“This was a political speech, 100% political, and he forgot one interest group: the taxpayers of the state of New Jersey,” said Assembly Minority Leader Jon Bramnick. “This is a governor who is totally out of touch with the working people who are paying the taxes.”
“Eight new taxes during the worst recession. New Jersey residents don’t have the luxury of going out and borrowing $9 billion, even if they’re the ones who’re going to foot the bill so it’s very disappointing,” said Assemblyman Hal Wirths.
A special commission must approve the borrowing plan before it even gets to lawmakers for debate. It’s uncertain how much input the public is going to get. This budget’s on a fast track with a tight Oct. 1 deadline.