NJ budget: Legislature sends $32.7B budget to Gov. Murphy's desk

Trenton Bureau

New Jersey legislators sent Gov. Phil Murphy a $32.7 billion state spending plan on Thursday that includes tax increases on millionaires, certain corporations and health insurers, as well as $4.5 billion worth of borrowing that taxpayers will have to pay back with interest.

Things moved quickly in Trenton, with lawmakers taking final votes on the budget just three days after the 251-page spending plan was made available to the public Monday. Now Murphy, who has indicated he will sign the bills, must do so by Oct. 1.

A coalition of unions, policy groups and nonprofit advocates urged more transparency last month, when at the time no public hearings had been scheduled, and their concerns continue.

“You can’t expect really equitable outcomes from the budget if you don’t have an equitable process where transparency and participation is paramount," said Sheila Reynertson, senior policy analyst for the left-leaning New Jersey Policy Perspective.

Senate leaders didn't expect much controversy because the budget was negotiated with Murphy's staff. The budget is atypical: It covers just 9 months instead of 12 months, the result of coronavirus upending the fiscal year, state revenue collections and tax due dates, among other things.

The Assembly passed the budget with a 51-27 vote and the Senate approved it 25-14, both votes largely along party lines with Republican lawmakers opposed. Both chambers also passed three related pieces of legislation that include increasing the tax rate on millionaires (A-10), freezing the corporate business tax at 2.5% through 2023 (A-4721), and increasing an assessment on HMOs from 3% to 5% (A-4722).

Democrats say the budget supports the middle class and vulnerable populations who lost their jobs and need a financial leg up because of the coronavirus. They pointed to $20 million for food pantries and the up to $500 rebate lawmakers promised as they brokered a deal on the millionaires tax.

“We cannot and will not neglect our weak and or vulnerable neighbors, or our children, just to say that we’ve saved a few dollars,” Assemblywoman Eliana Pintor-Marin, D-Essex, and chair of the Assembly budget committee.

Republicans decried the decision to borrow $4.5 billion, raise taxes and include millions of dollars of priorities in a year where revenues are down and families are struggling to get by.

“I wore my Christmas tie because with the presents included in the budget I thought we may be starting the holidays a little early this year,” said Sen. Declan O’Scanlon, R-Monmouth, referencing hundreds of millions of dollars worth of legislative priorities that lawmakers added to the budget.

Here's what else is in, or out, of the budget heading to Murphy's desk:

Racial justice programs: Murphy was criticized as “tone-deaf” for walking back his pre-pandemic proposal to spend $1.4 million on programs that reduce bias and promote racial equality. His latest budget proposal restored a majority, but not all, of those programs, and lawmakers want to add another $150,000 back in to study wealth disparities, reducing racial bias and anti-discrimination training.
Baby bonds: Murphy's proposal to provide a $1,000 bond for certain children born in 2021 was axed from lawmakers' spending plan. Murphy said, however, he puts the plan "very much into the category of not if, but when."
Lead pipe and paint removal: Lawmakers included $60 million Murphy proposed to prioritize removing lead water pipes, as well as another $5 million for a “Single Family Home Lead Hazard Remediation Fund” within the Department of Community Affairs to help families remove lead paint from their homes. Details of that program are not yet available.
Veterans homes: New Jersey should spend $250,000 on COVID-19 training, prevention and treatment at the Department of Military and Veterans Affairs, and $25,000 on burial assistance, the Legislature said in its budget proposal. The coronavirus tore through two state-run veterans homes in New Jersey, and the Paramus Veterans Memorial Home recorded the highest death toll of all long-term care facilities in the state.
K-12 education funding: Lawmakers have funneled millions more to K-12 education, but were not able to fulfill their goals of increasing spending overall. They want to spend another $25 million, for a total of $275 million next year, to help school districts pay for special education costs, and have added $22 million to help private schools cover costs of nurses, pay for public school lunches, provide childcare in certain districts and help districts fill vacant teaching positions.
Voting: Lawmakers added $15 million for "early voting" in New Jersey, bringing the total allocation to $20 million. The funds will be used to help reimburse counties for expenses required for the November election, according to Senate staff, which will mostly occur via mail-in ballots. This could include postage or costs to purchase additional drop boxes where voters can deliver their ballots.
Largest-ever pension payment: After years of not fully funding public employee pensions, lawmakers committed to a $4.7 billion injection, slightly down from the $4.9 billion amount Murphy proposed, and still about 80% of what experts recommend is needed to keep costs from ballooning further. Senate President Stephen Sweeney, D-Gloucester, said pension reform is coming next. “Reforms start as soon as this budget gets passed,” Sweeney said. “The governor had made a commitment to working on reforms when we announced the millionaires tax."
School-based mental health programs: Murphy proposed cutting funding for school-based programs that provide crisis intervention, suicide prevention and other mental health services to students. The administration defended the cuts saying they would be offset by an additional $45 million going to the Children’s System of Care, a wraparound program that includes mental and behavioral healthcare for families and students across the state. Lawmakers’ budget bill restores $15 million in funding for school-linked services programs within the Department of Children and Families.
Borrowing $4.5 billion: Lawmakers proposed borrowing $4.5 billion in order to make up for revenue losses caused by the coronavirus, which is $500 million more than the governor included in his budget. The bonds would cover about 13% of spending over the nine-month period. It is unclear what this borrowing will end up costing taxpayers in a state that already has $44.4 billion worth of bonded debt outstanding as of June 2019.
Year-end surplus: Legislators also added about $286 million into the surplus, for a total of over $2.5 billion, in case of a second uptick in COVID-19 cases that causes additional economic pain.
Helping former prisoners: Lawmakers added more than $5 million to fund re-entry programs, or services designed to help people leaving prison to transition back into society and obtain social service assistance, like healthcare or housing. Of those appropriations, $2 million goes to the New Jersey Re-entry Corporation, for a total of $9 million; $1 million each to a Mercer County Reentry Pilot Program and the Re-entry Coalition of New Jersey; $1 million to Volunteers of America Re-entry Services, for a total of $6 million; and $350,000 to the Pre-Release Employment Navigation and Re-Entry Services Program.
Millionaires tax: New Jersey's tax rate on income over $1 million will likely increase from 8.97% up to 10.75%, bringing in an estimated $390 million over 9 months. Legislators agreed to approve the millionaires tax -- a central campaign promise of Murphy -- in exchange for distributing up to $500 vouchers to certain low- and middle-income families next summer, around the time lawmakers and Murphy are expected to be running for reelection. The rebates are expected to cost $335 million. Single parents earning up to $75,000 a year and married couples earning up to $150,000 a year would be eligible.
CBT surcharge: Lawmakers agreed to freeze a surcharge on the corporate business tax rate at 2.5% until December 31, 2023, instead of decreasing to 1.5% for two years before disappearing after December 2021. The measure is predicted to create $210 million in new revenue.
HMO assessment: Lawmakers proposed increasing the HMO assessment on net written premiums from 3% to 5% to bring in $103 million in new revenue.

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