Topic Category: Tax and Budget

Getting Back on Track: Fully Fund NJ Transit by Taxing Big Corporations

Posted on by Alex Ambrose

Every day, hundreds of thousands of New Jersey residents rely on public transit to get around, taking trips to work, school, medical appointments, family visits, and to shop and dine. NJ Transit is at the heart of these daily journeys, helping more than 630,000 people statewide go where they need to be while keeping cars off the road and bringing the state closer to its climate and pollution reduction goals.[i] NJ Transit is an engine of economic opportunity and everyday necessity, particularly for people who do not own or drive a car, as well as low-income, Black, and Hispanic/Latinx residents who are more likely to use mass transit.

However, the agency’s future is in jeopardy due to years of underfunding, the lack of a stable and dedicated source of revenue, and a looming deficit of nearly $1 billion once federal pandemic assistance expires.[ii] This deficit would constitute nearly one-third of the system’s total budget and, without additional state funding, could lead to dramatic service cuts and fare hikes that would harm everyday commuters and the broader economy.[iii]

Instead of relying on service cuts and fare hikes, state lawmakers should consider an alternative: have the largest and most profitable corporations help fund NJ Transit, a public service they directly benefit from, by simply extending the Corporation Business Tax surcharge on companies making more than $1 million in profit. The surcharge is only paid by the top 2 percent of corporations earning profits in New Jersey — including many large multinational companies headquartered outside of the state like Amazon and Walmart — providing a fair and stable revenue source that spares small businesses and commuters.[iv] This tax generates $1 billion in revenue annually, filling almost precisely the budget hole left by expiring federal funds and years of state disinvestment.[v]

As corporations earn record-breaking profits and working families struggle with rising prices, taxing multinational corporations to support critical infrastructure that we all benefit from is a fair, responsible, and commonsense solution to fix NJ Transit in the short and long term.[vi]

NJ Transit is Vital to New Jersey’s Economy and Communities

Serving the densest state in the nation and providing direct access to New York City and Philadelphia, NJ Transit connects residents to millions of employment and economic opportunities, essential services, community resources, entertainment, and social activities. Being able to get around safely and reliably, and having transportation options for residents who do not or cannot drive, is vital to the region’s economy and the wellness of communities across New Jersey. A robust mass transit system also supports better health outcomes by significantly reducing trips made by car — an essential service given that transportation is the single largest source of air pollution in the state.

Mobility and Accessibility

Everyone in New Jersey benefits from NJ Transit and the options they provide to get around the state. From the white-collar worker taking the train to their office, to the building maintenance worker taking the bus, to the nurse taking the light rail to get to their shift at the hospital, all types of workers depend on mass transit to provide for their families and keep the state running.

Mass transit is also a critical lifeline for low-income families and those who cannot drive or afford their own car. Nearly half of NJ Transit bus riders do not own a car, more than half have an annual income of less than $35,000, and 80 percent rely on the bus more than five times per week.[vii] The racial divide in commuting is also stark: Black workers are three times as likely as white workers to not have a car at home, while Hispanic/Latinx and Asian-American workers are twice as likely as white workers to not have a car.[viii] Further, households in cities with higher concentrations of people of color, like Jersey City and Newark, are more likely to lack access to a vehicle compared to households statewide.[ix] Mass transit ensures mobility and accessibility not only for these families but also for those who are disabled and cannot drive.

Economic Benefits

NJ Transit’s economic benefits build on the nearly 270 million individual trips made per year, connecting people within the state and beyond.[x] Bus and train rides link people with higher-paid jobs, health care facilities, and higher education opportunities.[xi] In addition to trips within the state, NJ Transit provides residents with direct access to New York City and Philadelphia, as well as connections to job centers across the Northeast Corridor in cities like Boston and Washington, DC. More than 78 million riders use NJ Transit-operated or supported trains and buses to travel into and out of Manhattan, with another 5.2 million riders going into and out of Philadelphia.[xii]

And these trips go beyond everyday commuting for work. A survey of bus riders found that 40 percent of riders use the bus to get to places other than their job, including doctor’s appointments, school, and to shop and dine.[xiii] This means that off-peak service is essential to keep the state’s economy moving. Hundreds of thousands of riders also travel down the shore on the North Jersey Coast Line and to concerts and events at stadiums and performing arts centers in Newark, the Meadowlands, and Atlantic City, attracting people from across the country and generating millions in income annually.[xiv]

Access to these job opportunities not only benefit individual workers and their families, but businesses and the broader economy alike. Businesses benefit from access to a deep and talented pool of workers, and will often move near job centers served by mass transit as a result. This creates a self-reinforcing loop, making states like New Jersey a great place to live and station a business.[xv]

Direct investments in NJ Transit also pay off for the state and the communities it serves. Roughly $5 billion is generated annually through spending on mass transit in the state, creating a return on an investment of two dollars in economic benefits for every dollar spent on NJ Transit.[xvi]

Health and Environment

Robust public transit also benefits the state by reducing air pollution and improving the health of New Jersey families and the environment. With New Jersey’s expansive highway and road networks, the transportation sector is the state’s biggest source of air pollution.[xvii] Replacing car trips with a bus or train helps reduce air pollution and greenhouse gas emissions everywhere, particularly in communities overburdened by pollution. In 2019, NJ Transit displaced enough carbon dioxide to replace more than 800,000 passenger cars.[xviii] Increasing the use of public transportation will help New Jersey meet its goal of achieving an 80 percent reduction in greenhouse gas emissions by 2050.[xix]

More access to mass transit can also improve public health by reducing traffic congestion and injuries from car crashes. With fatal crashes and pedestrian fatalities on the rise, traffic safety should be viewed as a matter of public health. New Jersey has seen an increase in fatal crashes over the past two years, and road traffic crashes remain the leading cause of death for people under the age of 54 in the United States.[xx]

NJ Transit is Underfunded and Faces a Catastrophic Fiscal Cliff

Despite the crucial role of NJ Transit in morning commutes and the state’s economy, state lawmakers have routinely underfunded the agency over the last three decades. NJ Transit also lacks a dedicated and stable source of state funding, unlike comparable transit agencies across the country, making it near-impossible to balance annual budgets without forgoing capital improvements or raiding funds from other state programs. Now, with a one-time infusion of federal pandemic aid about to expire, NJ Transit faces a looming $1 billion budget shortfall that could lead to catastrophic service cuts and fare hikes.

Decades of Disinvestment

For decades, NJ Transit has not received enough state funding to cover its expenses, resulting in overcrowded buses, frequent train cancellations, and delays to much-needed service expansions like the Hudson-Bergen Light Rail. This underfunding is exemplified by the annual transfer of funding from NJ Transit’s capital budget — meant for updating and building new physical infrastructure — to cover annual operating costs, a practice that state lawmakers have allowed since 1990. Even so, lawmakers have historically provided NJ Transit with robust state funding until direct state aid was cut by 90 percent during the Christie administration.[xxi] As recently as 2009, the state invested $500 million annually in NJ Transit — far more than the $140 million direct state aid in the Fiscal Year (FY) 2024 budget.[xxii]

NJ Transit Receives Far Less Direct State Funding Than in Prior Decades

To cover its operating expenses, NJ Transit’s budget routinely raids hundreds of millions of dollars from other dedicated funds, most notably the Clean Energy Fund and NJ Transit’s own capital investment fund. Both raids are counterproductive: money from the Clean Energy Fund should support investments in new, green energy sources and technology, and raiding capital investments has left NJ Transit with more train breakdowns than its peer agencies.[xxiii]

Lack of state funding has also resulted in an overreliance on farebox revenue, i.e., commuter tickets and fares, a revenue source that is volatile year over year.[xxiv] Public transportation is a public service that benefits the state as a whole, not a “business” that should be expected to make a profit. Relying disproportionately on riders to balance NJ Transit’s budget functions as a regressive tax — shifting the financial burden on residents least able to afford it — and will never lead to a fully-funded, balanced budget.[xxv] Across the country, transit agencies more reliant on farebox revenue, including NJ Transit, are facing steeper budget shortfalls than agencies with stronger public investment.[xxvi]

 Reliance on Pandemic Aid

Already operating on a shaky foundation, NJ Transit and its finances were especially vulnerable to the COVID-19 pandemic and subsequent dip in ridership. In the years since, lawmakers have balanced the agency’s budget with an infusion of federal pandemic assistance from the CARES Act and American Rescue Plan. In total, NJ Transit will have received approximately $4.5 billion in federal pandemic aid, including roughly $800 million for the current fiscal year and $750 million next year in FY 2025, after which the aid expires.[xxvii]

A look at NJ Transit’s current budget shows that the agency faces deficits of approximately $1 billion — nearly 30 percent of its budget — once the pandemic aid runs out.

NJ Trnasit Faces a Nearly $1 Billion Deficit When Federal Pandemic Aid Expires in FY 2026

As pandemic-related federal relief ends with no congressional action on the horizon, state lawmakers will have to grapple with a severely underfunded and overstretched agency that service cuts and fare hikes alone will not be able to solve.[xxviii]

Lack of Dedicated Funding 

NJ Transit is not alone in experiencing a drop in ridership after the pandemic; however, it remains the only statewide transportation agency of its kind without dedicated state funding.[xxix]

While comparable transit agencies receive more than half of their funding from dedicated state and local revenue sources, a mere 5 percent of NJ Transit’s budget comes from direct state aid. Pennsylvania, Massachusetts, California, and Illinois fund their mass transit systems through a statutorily dedicated portion of the sales tax.[xxx] New York and Oregon fund their transit systems with corporate and payroll taxes on businesses within their service areas.[xxxi]

NJ Transit Receives Only 5% of its Budget From Direct State Aid, Far Less Than Similar Agencies

Recently, New York resolved a $600 million deficit without drastic fare hikes or service cuts by raising taxes on corporations, many of which benefit from public transit.[xxxii] Not only is the agency fully funded and with a balanced budget for the first time in 20 years, but projections show that this new revenue stream will help balance MTA’s budget through 2027. Dedicated revenue allows agencies to sustain operations in the short term as well as engage in long-term planning to ensure continued high-quality service for riders everywhere.

Recommendation: Dedicate the Corporate Surcharge to Fund NJ Transit

To balance NJ Transit’s budget and put the agency on a path of long-term stability, any dedicated revenue must be substantial enough to cover the nearly $1 billion deficit and protect against future crises and shocks. New funding should also come from those with the highest incomes and wealth rather than the low-income residents for whom fares already serve as a de facto tax.[xxxiii] By simply extending the Corporation Business Tax surcharge, New Jersey can save NJ Transit with revenue generated by the world’s biggest and wealthiest corporations that have long benefited from the state’s infrastructure and workforce.  

A Fair Source of Revenue

 With many families struggling to keep up with rising costs, corporate profits have soared to record levels.[xxxiv] This concentration of wealth and resources has not only failed to trickle down to workers and their families, but has also coincided with significant corporate tax cuts at the state and federal levels. Most notably, the Trump-era tax cuts lowered the federal corporate tax rate to its lowest level since 1946.[xxxv] Tax avoidance is also on the rise, even with these lower tax rates, with more than one-third of large corporations paying nothing in taxes.[xxxvi] Having profitable corporations that directly benefit from public transit help pay for those investments would promote fairness, spare low- and middle-income riders from drastic fare increases, and provide NJ Transit with a stable source of revenue now and into the future.

And when states have cut corporate tax rates, the promised economic boom times rarely reach workers, with corporate tax rates having little correlation with income growth.[xxxvii] What corporate tax cuts do correlate with is rising inequality, with lower corporate taxes leading to more concentration of wealth in the top 1 percent of households.

When corporations pay a state tax, the dollars come from shareholders and highly paid executives, not average workers or consumers.[xxxviii]

Dedicating the CBT Surcharge

 New Jersey has already recognized how taxing highly profitable corporations can advance equity, fiscal responsibility, and smart economic investments. Enacted in 2018, the Corporation Business Tax (CBT) surcharge is a 2.5 percent tax on corporations with over $1 million in annual profits. This $1 billion revenue source targets the most profitable corporations in the world, but it is set to expire at the end of 2023 unless lawmakers extend it.

Because this tax is applied to profits, not revenue, the few affected corporations would remain incredibly profitable. And because the tax is applied to profits earned in New Jersey, not solely on companies headquartered in the state, it is primarily paid by large multinational corporations — like Amazon, Walmart, and Bank of America — that have no incentive to stop doing business in New Jersey. The $1 million profit threshold ensures that only the most profitable 2 percent of corporations operating in the state will pay it, meaning that 98 percent of New Jersey businesses will not pay the surcharge at all.[xxxix] And since the surcharge has been a part of New Jersey’s tax code since 2018, extending it would not create a new tax or expense for the roughly 2,500 corporations that currently pay it.

Dedicating the Corporate Surcharge to NJ Transit Would Solve the Budget Shortfall

To fix NJ Transit and give it the financial resources it needs to thrive in the coming decades, lawmakers should dedicate revenue from the CBT surcharge to pay for NJ Transit operations. The surcharge is estimated to bring in $1 billion in annual revenue, according to budget documents released by the Murphy administration, just as NJ Transit faces a nearly $1 billion budget deficit.[xl] A dedication of corporate surcharge funds will allow the agency to reduce its reliance on money from its capital fund and the Clean Energy Fund, allowing those dollars to go to their intended uses rather than patching over the system’s operations.[xli]

It is worth noting that NJ Transit is not the only agency or piece of state infrastructure that will require additional funding once federal pandemic assistance expires. Local school districts and child care providers, for example, are just two critical sectors that will need state investment to replace expiring federal aid.[xlii]

If state lawmakers do not want to use the entire CBT surcharge on transit so they have additional funding for other programs, they should dedicate at least $500 million to NJ Transit to bring state aid back to historical levels prior to the Christie administration. When adjusted for inflation, state investment in NJ Transit averaged over $400 million in annual spending during the 1980s, early 1990s, and during the pre-recession 2000s.[xliii] To be clear, this would not fully resolve NJ Transit’s budget deficit, but it would likely stave off the most disastrous cuts and fare hikes — if combined with other funding measures — while providing lawmakers time to find alternative funding sources.

Whichever path lawmakers choose, extending a tax on wealthy corporations to stabilize and fund NJ Transit can alleviate its fiscal woes and advance New Jersey’s economic and environmental goals, without pushing those costs onto low-income residents.

The Alternative is a Disaster

 If lawmakers do not find a new, dedicated source of revenue for NJ Transit, the alternative is nothing short of a disaster. Given the scale of NJ Transit’s budget deficit, balancing the agency’s budget primarily through fare hikes and service cuts could lead to a transit “death spiral,” a vicious cycle in which higher fares and reduced service lead to fewer riders, less revenue, and further cuts.[xliv] This would gut what remains of NJ Transit’s ridership base, jeopardizing the state’s economic growth, cutting off access to jobs from hundreds of thousands of residents, and dooming any progress towards the state’s climate and emission reduction goals. It shouldn’t have taken a crisis for lawmakers to finally dedicate funding to NJ Transit, but with a nearly $1 billion shortfall and no good alternative, they have no choice but to act.

 

End Notes

[i] NJ Transit averaged 637,100 rides on weekdays in the 2nd quarter of fiscal year 2023. See Appendix A, NJ Transit Minutes for April 19, 2023, https://content.njtransit.com/sites/default/files/board/meeting_minutes/2023_04_19_OpenSessEXP.pdf.

[ii] The nearly $1 billion in NJ Transit deficits can be seen in Appendix D of the NJ Transit Minutes for April 19, 2023, https://content.njtransit.com/sites/default/files/board/meeting_minutes/2023_04_19_OpenSessEXP.pdf at exh. B, app’x D, p. 64876.

[iii] John Reitmeyer, NJ Transit Fare Hikes: Only a matter of time? NJ Spotlight News, Aug. 21, 2023, https://www.njspotlightnews.org/2023/08/nj-transit-money-woes-make-fare-hikes-service-cuts-possible/. The overall budget of NJ Transit for FY 2026 is approximately $3 billion. See Appendix D of the NJ Transit Minutes for April 19, 2023, https://content.njtransit.com/sites/default/files/board/meeting_minutes/2023_04_19_OpenSessEXP.pdf at exh. B, app’x D, p. 64876.

[iv] N.J. Stat. 54:10A-5.41 (2023).

[v] The nearly $1 billion in NJ Transit deficits can be seen in Appendix D of the NJ Transit Minutes for April 19, 2023, https://content.njtransit.com/sites/default/files/board/meeting_minutes/2023_04_19_OpenSessEXP.pdf at exh. B, app’x D, p. 64876.

[vi] Governor’s FY 2024 Budget in Brief, https://www.state.nj.us/treasury/omb/publications/24bib/BIB.pdf at p. 65.

[vii] New Jersey Transit, NJ Transit Sustainability Plan 2023: Draft (2023) at p. 19 https://content.njtransit.com/sites/default/files/sustainability/NJ%20TRANSIT%20Sustainability%20Plan_DRAFT_05312023.pdf

[viii] National Equity Atlas, Car Access: New Jersey 2020, Percent of households without a vehicle by race/ethnicity, https://nationalequityatlas.org/indicators/Car_access?geo=02000000000034000 (last accessed Sept. 21, 2023). See generally Demos, To Move Is To Thrive: Public Transit and Economic Opportunity for People of Color, Algernon Austin, November 15, 2017. https://www.demos.org/research/move-thrive-public-transit-and-economic-opportunity-people-color

[ix] See National Equity Atlas, Car Access: New Jersey vs. Newark, NJ, 2020, Percent of households without a vehicle by race/ethnicity, https://nationalequityatlas.org/indicators/Car_access?geo_compare=07000000003451000&geo=02000000000034000 (last accessed Sept. 21, 2023); National Equity Atlas, Car Access: New Jersey vs. Jersey City, NJ, 2020, Percent of households without a vehicle by race/ethnicity, https://nationalequityatlas.org/indicators/Car_access?geo_compare=07000000003436000&geo=02000000000034000 (last accessed Sept. 21, 2023).

[x] New Jersey Transit, About Us, last accessed Sept. 17, 2023, https://www.njtransit.com/about/about-us.

[xi] See Jon Carnegie, Deva Deka & Andrea Lubin, Marketing Research for the Quantifiable Benefits of Transit in New Jersey, New Jersey Dep’t of Transportation Bureau of Research Paper No. FHWA-NJ-2021-006, https://rosap.ntl.bts.gov/view/dot/61821 at 35.

[xii] Jon Carnegie, Deva Deka & Andrea Lubin, Marketing Research for the Quantifiable Benefits of Transit in New Jersey, New Jersey Dep’t of Transportation Bureau of Research Paper No. FHWA-NJ-2021-006, https://rosap.ntl.bts.gov/view/dot/61821 at 3.

[xiii] https://tstc.org/wp-content/uploads/2019/12/Bus-Survey-Results-Report.pdf

[xiv] Jon Carnegie, Deva Deka & Andrea Lubin, Marketing Research for the Quantifiable Benefits of Transit in New Jersey, New Jersey Dep’t of Transportation Bureau of Research Paper No. FHWA-NJ-2021-006, https://rosap.ntl.bts.gov/view/dot/61821 at 36.

[xv] Siqi Zheng, MIT Climate Portal, Explainer: Public Transportation, Feb. 21, 2023, https://climate.mit.edu/explainers/public-transportation.

[xvi] See Jon Carnegie, Deva Deka & Andrea Lubin, Marketing Research for the Quantifiable Benefits of Transit in New Jersey, New Jersey Dep’t of Transportation Bureau of Research Paper No. FHWA-NJ-2021-006, https://rosap.ntl.bts.gov/view/dot/61821 at 2.

[xvii] A recent federal estimate puts the transportation sector at 47.9% of New Jersey’s carbon emissions. U.S. Energy Information Administration, Table 3: State Energy-Related Carbon Dioxide Emissions by Sector, 2021, July 12, 2023, https://www.eia.gov/environment/emissions/state/excel/table3.xlsx.

[xviii] Analysis of NJ Transit Draft Sustainability Plan, p. 6. https://content.njtransit.com/sites/default/files/sustainability/NJ%20TRANSIT%20Sustainability%20Plan_DRAFT_05312023.pdf. Analysis done using NJ Transit carbon impact and US EPA greenhouse gas equivalencies calculator. Environmental Protection Agency, Greenhouse Gas Equivalencies Calculator (July 2023), https://www.epa.gov/energy/greenhouse-gas-equivalencies-calculator

[xix] New Jersey Dep’t of Environmental Protection, New Jersey’s Global Warming Response Act 80×50 report, p. v, https://dep.nj.gov/wp-content/uploads/climatechange/nj-gwra-80×50-report-2020.pdf.

[xx]New Jersey State Police Fatal Accident Investigation Unit, Fatal Motor Vehicle Crash Comparative Data Report for the State of New Jersey, p. 2 (2022) https://nj.gov/njsp/information/pdf/fcr/2021_fatal_crash_report.pdf; Centers for Disease Control and Prevention, Road Traffic Injuries and Deaths – A Global Problem, Jan. 10, 2023,  https://www.cdc.gov/injury/features/global-road-safety/index.html.

[xxi] Emma G. Fitzimmons & Patrick McGeehan, New Jersey Transit, a Cautionary Tale of Neglect, N.Y. Times, Oct. 13, 2016, https://www.nytimes.com/2016/10/14/nyregion/new-jersey-transit-crisis.html

[xxii] NJPP analysis of NJ budget documents from FY 1985 to present.

[xxiii] See Alex Ambrose, New Jersey Policy Perspective, Stop the Raids: The Clean Energy Fund Should Fund Clean Energy, Jan. 12, 2023, https://www.njpp.org/publications/report/stop-the-raids-the-clean-energy-fund-should-fund-clean-energy/. Elise Young, NJ Transit’s Creaky, Empty Trains Stir Worry of Fare Increases, Bloomberg, Feb. 24, 2023, https://www.bloomberg.com/news/articles/2023-02-24/nj-transit-delays-hit-record-high-despite-gov-murphy-pledge-to-fix-trains

On the capital-to-operating raid, the New Jersey Department of Transportation notes that because of underfunding, NJ Transit has to use capital funding for basic maintenance and operations, rather than on long-term purchasing of new trains, buses, and equipment. See Nikita Biryukov, No dedicated funding source for NJ Transit this year, budget chair says, New Jersey Monitor, May 4, 2023, https://newjerseymonitor.com/2023/05/04/no-dedicated-funding-source-for-nj-transit-this-year-budget-chair-says/.

[xxiv] Over the past two decades, farebox revenue has fluctuated from highs of over $1 billion to lows of $375 million during the peak of the COVID-19 pandemic.

[xxv] Based on 2021 consumer expenditure data, the average household in the bottom 10 percent in income spent roughly 2.3% of income on public and other transportation, compared with a mere 0.5% in the top 10 percent. See Bureau of Labor Statistics, Consumer Expenditure Surveys, Table 1110, Deciles of income before taxes: Annual expenditure means, shares, standard errors, and coefficients of variation (2022). https://www.bls.gov/cex/tables/calendar-year/mean-item-share-average-standard-error/cu-income-deciles-before-taxes-2021.pdf

[xxvi] The Metropolitan Transportation Authority has analyzed its finances and identified volatile farebox revenue as a prime driver of its fiscal risks. See Office of the State Deputy Comptroller for the City of New York, Fare Revenue Considerations for the Metropolitan Transportation Authority (November 2022), https://www.osc.state.ny.us/reports/osdc/fare-revenue-considerations-metropolitan-transportation-authority.

[xxvii] Governor’s Disaster Recovery Office, COVID-19 State Funding Financial Table, Responsible Agency: NJ Transit, last updated June 30, 2023, https://gdro.nj.gov/tp/en/financial-analysis/table-view/state?bureau=376369859&sortColumn=agency&sortValue=asc&pageSize=15&pageOffset=0&lang=en.

[xxviii] Transit agencies were fortunate that unexpended pandemic aid avoided the chopping block, as a target of House Republican cuts to federal aid nationally. See Ian Duncan & Justin George, Ailing Transit Agencies to Keep Pandemic Funding in Debt Ceiling Deal, Washington Post, June 2, 2023 https://www.washingtonpost.com/transportation/2023/06/02/covid-aid-transit-debt-ceiling/.

[xxix] American Public Transportation Association, Policy Brief: Public Transit Agencies Face Severe Fiscal Cliff, June 2023, p. 2 https://www.apta.com/wp-content/uploads/APTA-Survey-Brief-Fiscal-Cliff-June-2023.pdf

[xxx] Pennsylvania deposits 4.4% of sales tax into its Public Transportation Trust Fund. See Southeastern Pennsylvania Transportation Authority, Fiscal Year 2024 Operating Budget, Fiscal 2025-2029, Financial Projections (2023), https://planning.septa.org/wp-content/uploads/2023/04/FY2024-Operating-Budget-Proposal-4.pdf, p. 80; Phineas Baxandall, Massachusetts Budget and Policy Center, How Slow Sales Tax Growth Causes Funding Problems for the MBTA, Jan. 10, 2018, https://www.massbudget.org/reports/pdf/MBTA%20Sales%20Tax%20Explainer%20FINAL%201-8-2018.pdf p. 1;  California has two separate dedicated funds for transit, one based on a quarter-cent of the general sales tax and a separate formula for state transit assistance, see Caltrans, Transportation Development Act, accessed Sept. 21, 2023, https://dot.ca.gov/programs/rail-and-mass-transportation/transportation-development-act; Illinois Dep’t of Revenue, Mass Transit District Sales Tax, accessed Sept. 21, 2023, https://tax.illinois.gov/localgovernments/masstransit.html.

[xxxi] Trimet, Payroll and Self-Employment Tax Information, Employer Payroll Tax, accessed Sept. 21, 2023, https://trimet.org/taxinfo/#employer

[xxxii] Metropolitan Transit Authority, MTA Announces Balanced Budget Through 2027 in July Financial Plan, July 17, 2023, https://new.mta.info/press-release/mta-announces-balanced-budget-through-2027-july-financial-plan.

[xxxiii] For an overview on how progressive taxes in which higher-income and higher-wealth residents pay a higher effective tax rate than their lower-income neighbors, see Carl Davis & Meg Wiehe, Institute on Taxation and Economic Policy, Taxes and Racial Equity, Mar. 31, 2023, https://itep.org/taxes-and-racial-equity/. For the de facto tax imposed on low-income residents, see endnote 25 above.

[xxxiv] Corporate profits in Q2 2023 were 38 percent higher than they were in Q2 2019, at nearly $3.2 trillion. U.S. Bureau of Economic Analysis, National income: Corporate profits before tax (without IVA and CCAdj) [A053RC1Q027SBEA], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/A053RC1Q027SBEA, September 6, 2023.

[xxxv] Tax Policy Center, Historical Corporate Income Marginal Tax Rates, Tax Years 1942-2022, February 2022. https://www.taxpolicycenter.org/statistics/marginal-corporate-tax-rates

[xxxvi] Steve Wamhoff, Institute on Taxation and Economic Policy, GAO Report Confirms: Trump Tax Law Cut Corporate Taxes to Rock Bottom, Jan. 13, 2023, https://itep.org/government-accountability-office-report-confirms-trump-tax-law-cut-corporate-taxes-increased-corporations-paying-zero-taxes/

[xxxvii] Josh Bivens, Economic Policy Institute, Reclaiming Corporate Tax Revenues, April 14, 2022, https://www.epi.org/publication/reclaiming-corporate-tax-revenues/.

[xxxviii] William G. Gale & Samuel I. Thorpe, Brookings Institution, Rethinking the incidence of the corporate income tax, May 10, 2022, https://www.brookings.edu/articles/rethinking-the-incidence-of-the-corporate-income-tax/.

[xxxix] Sheila Reynertson, New Jersey Policy Perspective, Stop the Sunset: Corporate Tax Cut Would Benefit the Biggest and Most Profitable Businesses (Feb. 22, 2023), https://www.njpp.org/publications/report/stop-the-sunset-corporate-tax-cut-would-benefit-the-biggest-and-most-profitable-businesses/

[xl] See Governor’s FY 2024 Budget in Brief (2023) https://www.state.nj.us/treasury/omb/publications/24bib/BIB.pdf at p. 65.

[xli] See Alex Ambrose, New Jersey Policy Perspective, Stop the Raids: The Clean Energy Fund Should Fund Clean Energy, Jan. 12, 2023, https://www.njpp.org/publications/report/stop-the-raids-the-clean-energy-fund-should-fund-clean-energy/. On the capital-to-operating raid, Transportation Commissioner Diane Gutierrez-Scaccetti notes that because of underfunding, NJ Transit has to use capital funding for basic maintenance and operations, rather than on long-term purchasing of new trains, buses, and equipment. See Nikita Biryukov, No dedicated funding source for NJ Transit this year, budget chair says, New Jersey Monitor, May 4, 2023, https://newjerseymonitor.com/2023/05/04/no-dedicated-funding-source-for-nj-transit-this-year-budget-chair-says/.

[xlii] See Peter Chen et al., New Jersey Policy Perspective, Red Flags Amid a Sea of Green: Breaking Down New Jersey’s FY 2024 Budget, Aug. 8, 2023, https://www.njpp.org/publications/report/red-flags-amid-a-sea-of-green-breaking-down-new-jerseys-fy-2024-budget/.

[xliii] See Chart 1 above.

[xliv] Colleen Wilson, NJ Transit has had many fiscal crises. Here’s why the one that’s looming will be worse, NorthJersey.com, Jul. 17, 2023, https://www.northjersey.com/story/news/transportation/2023/07/17/nj-transit-fare-increases-service-cuts-new-fiscal-crisis/70407492007/

Red Flags Amid a Sea of Green: Breaking Down New Jersey’s FY 2024 Budget

Posted on by Peter Chen

Negotiated behind closed doors and voted on without public input, the latest state budget wasted a historic opportunity to fix New Jersey’s finances and boost investments in historically underfunded areas. Instead, lawmakers used record-setting revenue collections to fund costly tax cuts and credits for wealthy households and profitable corporations, threatening the state’s long-term fiscal health.

On the positive side, the $54.3 billion budget for Fiscal Year (FY) 2024 includes another full pension payment and a record level of school funding.[i] The budget also continues investments in the many building blocks of a strong and healthy state: expanded pre-K, increased college tuition assistance, increased access to affordable health care, and much more.

However, three major red flags in the budget undermine the sustainability of these essential public services and programs.

Red Flags: A Shaky Fiscal Footing

New Jersey, like every state, is required to pass a balanced budget, meaning it must raise enough revenue to account for all of its expenses. The major changes in this year’s budget, to both the tax code and expenditures, have the state spending more than it takes in, raising three red flags about the state’s ability to pass a balanced budget in subsequent years. First, the growing investments in the budget rely on a temporary boost in tax collections that is already declining. Second, new corporate tax cuts and tax credits for wealthy homeowners will further weaken future revenue collections. Third, the budget relies on federal pandemic aid that will soon expire, creating looming funding shortfalls that must be addressed as early as next year.

Despite the budget’s continuation of important investments, it will largely be remembered for its short-term giveaways to profitable corporations, wealthy individuals, and politically-connected insiders who loaded up line items and side deals, while kicking long-term structural budget problems down the road.

Red Flag 1: Declining Revenues, Shrinking Surplus

The FY 2024 budget includes new and growing investments that will require consistent funding in future years. Yet, the revenue streams supporting these investments are already starting to wane. Recent revenue snapshots show that last year’s unprecedented boost in tax collections was temporary, with the state’s major revenue sources on the decline.[ii] Bringing in less revenue threatens the sustainability of the investments made in the latest state budget and could hamper future improvements to public services and programs that New Jersey families, communities, and businesses rely on.

Increased spending and declining revenues leave the state at a structural deficit, with expenditures now surpassing revenue collections by roughly $1.5 billion. This deficit is already eroding the state’s historic surplus, as the Governor’s original $10 billion projected surplus for FY 2024 has already come down to $8.1 billion.[iii] That means the state has less of a safety net if revenue collections continue to decline in the near future.

The shift in revenues and expenditures between the budget initially proposed by Governor Murphy and the one ultimately signed into law should serve as a clear warning signal for the state.

Table: Appropriations Surpass Revenue Collections in FY 2024 Budget

Original Proposed Budget Final Approved Budget
Revenues $53,828,554 $52,801,265
Appropriations $53,084,949 $54,357,547
Net difference +$743,605 -$1,556,282

Source: FY 2024 Appropriations Bill Scoresheet: https://pub.njleg.state.nj.us/publications/budget/Scoresheet,%20As%20Introduced.pdf

The surplus funds won’t last long if New Jersey continues to spend more than it generates in revenue, a trend likely to continue given the elimination of the corporate business tax surcharge and other tax giveaways buried in the budget deal. The state’s Rainy Day Fund also remains woefully drained, leaving New Jersey unprepared to weather bumpier economic conditions in the years to come.[iv]

During the Great Recession, the state saw the devastating consequences of costly tax cuts and an empty reserve.[v] New Jersey cannot afford to repeat the mistakes of the past, especially now, as far too many families are struggling to keep up with rising costs and afford basic expenses. Lawmakers must prioritize tax policies that generate enough revenue to both cover the state’s expenditures and build up reserves so vital state services are there for families and communities when they need them the most.

Red Flag 2: Costly Corporate Tax Cuts and Credits

Even with increased investments that will require consistent funding in future years, the new state budget contains a $1 billion tax cut for the world’s biggest and most profitable corporations.[vi] Add in other corporate tax changes that reward offshoring of profits to foreign countries, hundreds of millions in tax credits for specific industries, and a costly property tax credit program that will disproportionately benefit wealthy households, and New Jersey could experience significant revenue losses in the face of rising costs and potential economic turmoil.

For context, the Corporation Business Tax currently includes an additional 2.5 percent surcharge on businesses with more than $1 million in profit. The surcharge, which will expire unless it is renewed before the end of the calendar year, only applies to the top 2 percent of businesses earning the most in profit.[vii] This includes all corporations that generate profit in New Jersey — including multinational corporations, e-commerce sites, and chain retailers like Amazon, Walmart, and Starbucks — not merely companies headquartered in the state. Eliminating the surcharge would enrich a select few corporations and their shareholders at the expense of workers and families who benefit from the various investments in infrastructure, transit, schools, and safety net programs that the surcharge helps fund.

The budget also includes new legislation that will open up more loopholes in the corporate tax code, which may accelerate the erosion of the corporate tax base even further.[viii] These changes would allow multinational corporations to evade taxation by shifting their income to subsidiaries based in foreign tax havens. Though billed as “revenue-neutral,” these changes would reward corporations who shift profits abroad, reducing their tax liability in future years and continuing a trend of eroding corporate tax bases at the state level.[ix]

On top of these risky corporate tax changes, the budget also incorporates the costly Stay NJ proposal, which provides a significant property tax credit to senior homeowners. If implemented fully, the program will cost approximately $1.7 billion, all of which is unfunded.[x] And due to its proposed structure benefiting wealthy homeowners, Stay NJ would overwhelmingly go to the highest-income households and would widen the state’s racial wealth gap.[xi]

As revenues already appear to be declining and spending continues to increase, wealthy corporations experiencing record profits have managed to pay less towards the state’s core investments and keep more for their shareholders and high-paid executives.

Red Flag 3: Unaddressed Fiscal Cliffs

While the new budget includes enough revenue and surplus funds to cover investments for FY 2024, looming funding gaps across various areas have been kicked down the road with no plans to address them. This includes fiscal cliffs from expiring federal pandemic assistance that has propped up local and county budgets, school districts, and state agencies that now anticipate major deficits in future years.[xii] Federal pandemic aid will have to be expended in the next few years, leaving a funding cliff when they expire.

Key programs facing cliffs include:

  • NJ Transit: In FY 2025, NJ Transit, which does not have a sustainable funding source, has budgeted $749 million in federal relief. In FY 2026, that drops to $0.[xiii] Expiring federal aid, combined with lower fare collections, leave NJ Transit with a projected shortfall of roughly $1 billion in FY 2026.
  • Child care: By September 2024, nearly $890 million in federal funds will expire, leaving the child care sector vulnerable to more closures.[xiv]
  • K-12 schools: In September 2023, $1.2 billion in federal education funds will expire, followed by another $2.7 billion in September 2024.[xv] As it stands, the state currently does not fully fund its school funding formula.

 

Although these funds were designed to be temporary, a failure to replace them with sustainable state funding could lead to harmful cuts that would hamstring New Jersey’s economy and damage the very assets that make the state a great place to live, raise a family, and start a business: infrastructure, education, and robust government services. Lawmakers will face difficult decisions sooner than they might like, as they must find new ways to continue funding these services or determine which ones to cut. Past experience has shown that when spending cuts come, they disproportionately harm Black and Hispanic/Latinx communities and low-income households.[xvi]

Sea of Green: Notable Investments and Budget Lines

Looking past the red flags, New Jersey’s FY 2024 budget includes many important investments in public services and programs that support New Jersey families, communities, and the broader economy. From tax credits for working families, to increased funding for education, to health insurance subsidies that increase access to comprehensive health care, the initiatives highlighted below are designed to uplift individuals and families across the state, raise the standard of living, and contribute to the future prosperity of the state.

Economic Security

Working Family Tax Credits

The New Jersey Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) pay workers and their families money back in their tax returns, supporting strong families, reducing poverty, and helping to make New Jersey affordable for working- and middle-class households.

The FY 2024 budget doubles the Child Tax Credit (CTC), providing up to $1,000 for every child under age 6 to families earning up to $80,000, benefitting up to 372,000 children.[xvii] While the CTC expansion passed with overwhelming bipartisan support, and the increased credit is welcome news, the budget did not include a proposal to expand eligibility and access to the benefit for children up to 12 years old.[xviii]

It’s worth noting that the cost of the CTC expansion, roughly $120 million, pales in comparison to new tax credits for businesses included in the budget. Film and television studios alone will receive more than $230 million in new tax credits in FY 2024.[xix]

The FY 2024 budget also leaves the EITC unchanged, despite pending legislation to reduce barriers in the program and increase benefit levels to further boost workers’ wages.[xx] To better support working families struggling with rising living costs, lawmakers should increase the EITC to 50 percent of the federal credit and expand eligibility to immigrants with Individual Tax Identification Numbers. These changes would get more money back into the pockets of families who need it, reducing poverty and strengthening local economies across the state.

WorkFirst NJ

New Jersey’s Temporary Assistance for Needy Families (TANF) program, WorkFirst NJ, is supposed to provide basic financial support to very low-income households. While it is well-known that this program is underfunded and falls short for low-income families, the FY 2024 budget failed to increase WorkFirst NJ benefits.[xxi] The current grant amount — the maximum benefit is $559 a month for a family of three — remains far too low to meet the program’s goal of helping families afford their most basic needs.[xxii] For this program to succeed at helping families get by and break the cycle of poverty, lawmakers must commit to raising WorkFirst NJ benefits, reworking the program to meet the realities of today’s families, and moving TANF away from its racist “welfare reform” roots.[xxiii]

Education

The FY 2024 budget continues to bring New Jersey closer to fully funding the state’s school funding formula, investing $11 billion in K-12 education, which includes $103 million in stabilization aid for school districts facing cuts.[xxiv] This is an increase of more than $800 million compared to the prior year. This increase, as well as those made throughout Governor Murphy’s tenure, are critical to ensuring that New Jersey meets its constitutional obligation to fully fund education. Pre-kindergarten funding also received a boost of $116 million over the prior year, bringing New Jersey closer to its statutory goal of universal preschool.[xxv]

The number of children attending schools that receive less than adequate aid under the formula has reduced substantially since 2015.[xxvi] However, there is evidence that the School Funding Reform Act (SFRA) targets are too low to meet New Jersey’s current and more rigorous educational standards.[xxvii] While fully funding the school funding formula remains an important short-term goal, resetting its adequacy targets to meet the new, higher outcome standards must become a priority for lawmakers.

Health

Cover All Kids

Cover All Kids is a hallmark achievement of the Murphy administration, with all income-eligible children now able to receive public health insurance, regardless of immigration status.[xxviii] This initiative reduces barriers to health care and is responsible for recent progress in lowering the number of uninsured children across the state.[xxix] The FY 2024 budget includes $14.1 million for this initiative.[xxx] It is unclear how much of last year’s funding will carry forward, and the program’s continued success will require ongoing investments to maintain outreach and enrollment efforts. The budget also includes language allowing the state to explore affordable health insurance options for all children, regardless of immigration status, who are not income-eligible for NJ Family Care, closing the final implementation gaps and providing universal coverage for all kids in New Jersey.[xxxi] 

Health Insurance 

Over the last few years, increased health insurance subsidies have helped get a record number of people insured, and the FY 2024 budget continues to invest $25 million to support health insurance marketplace subsidies.[xxxii] However, with the end of the COVID-19 public health emergency, many people will likely lose their public health insurance coverage, forcing them to find coverage elsewhere.[xxxiii] It’s unclear whether flat funding will be sufficient to maximize coverage.

Medical Debt Relief

The burden of medical debt has widespread consequences on the economic stability of individuals and families. The FY 2024 budget includes a novel pilot program with a $10 million investment of pandemic relief funds to assist families reduce their medical debt.[xxxiv] This program will focus on helping low- and middle-income residents, with eligibility limited to residents who have a household income below 400 percent of the federal poverty level ($99,440 for a family of three in 2023) or have medical debt equal to 5 percent or more of the household’s income.[xxxv] Although details on the program are still forthcoming, similar programs in other states have helped eliminate residents’ medical debt for pennies on the dollar.[xxxvi]

Reproductive Health 

Last year, Governor Murphy signed legislation to codify abortion rights in New Jersey, solidifying the state’s commitment to protecting the right to reproductive freedom.[xxxvii] The FY 2024 budget reaffirms this commitment with a $10 million investment to increase reimbursement rates for reproductive health care providers.[xxxviii] This will help support clinics and health care professionals currently overwhelmed and under-resourced, serving New Jersey and out-of-state residents seeking a safe haven in the Garden State.[xxxix] The budget also continues to invest in family planning services through the state’s Department of Health with a $30 million allocation.[xl] Similarly, the new initiatives from last year’s budget to address the post-Dobbs threats to reproductive health — for training OBGYNs, facilities upgrades, and security needs — are maintained at $20 million. [xli]

To build on the state’s recent successes in reproductive health, lawmakers must consider expanding access to abortion care for uninsured and underinsured residents just as the state does for other prenatal care.[xlii]

Maternal Health

Funding in the FY 2024 budget also reflects the Murphy administration’s commitment to addressing New Jersey’s wide racial disparities in maternal and infant health. The budget includes a $200,000 investment in the Restorative Maternal Health Birthing Center in Trenton.[xliii] Additionally, the budget includes a $4.5 million increase in funding for the Universal Home Visiting program, which entitles all parents with newborn infants to at least one free postpartum home visit.[xliv] The program will receive a total of $15.6 million for FY 2024.[xlv]

Prescription Drugs

The high cost of prescription drugs has reached crisis levels: Nearly a quarter of New Jersey residents have not taken medicine as prescribed due to concerns about cost.[xlvi] The FY 2024 budget takes initial steps toward addressing this urgent issue. Thanks to new laws and investments in the budget, residents will see EpiPen, insulin, and asthma inhaler costs capped on certain state-regulated insurance plans, in addition to lower prices at the pharmacy for some medications, depending on their insurance plan, in the coming months.[xlvii] The budget also includes expanded affordability measures for seniors on Medicare.[xlviii]

The budget also created the Drug Affordability Council (DAC) to bring transparency to the pharmaceutical industry. The DAC will research the underlying factors behind high drug costs and make recommendations to lawmakers on ways to further rein in costs and make prescription drugs affordable for more residents.[xlix] State leaders will need to provide sufficient support for the DAC and act quickly on its recommendations to lower prescription drug prices further.

Harm Reduction Services

Harm reduction services are essential to support people who use drugs, keep people out of the criminal legal system, and promote long-term health and public safety. The FY 2024 budget maintains funding levels for existing harm reduction centers at $4.5 million.[l] In supporting the expansion of local harm reduction centers, the new harm reduction center operated by Black Lives Matter Paterson will receive a grant for $250,000.[li] There is also funding for expanded access to naloxone, so pharmacies across the state can provide the life-saving drug anonymously and for free.[lii] Separate from the state budget, New Jersey will receive $600 million over the next two decades from settlements with opioid manufacturers, which should be allocated to harm reduction service expansion and healing the harms of the War on Drugs.[liii]

Public Safety

 Public Defender Fees

The constitutional right to counsel guarantees legal representation for those accused of a crime, regardless of their ability to pay. Until now, one’s right to legal representation from a state-issued public defender in New Jersey came with a price tag, sometimes in excess of $1,000.[liv] These high fees not only contributed to the cycle of poverty but also created perverse incentives for defendants, as accepting a plea bargain came with lower fees than fighting a case. The latest state budget eliminates state-level public defender fees — a huge win for the residents of New Jersey and a major step toward a more equitable justice system for all.

The FY 2024 budget appropriates $4.4 million to both cover the costs of public defender fees and provide modest pay increases for attorneys that assist the Office of the Public Defender (OPD).[lv] The Legislature also repealed the statute requiring fees and wiped out existing liens owed to the OPD.[lvi]

Unfortunately, municipal and county-level public defenders may still require fees for service. Eliminating public defender fees across the board is the logical next step for state lawmakers, as access to a constitutional right should not exist behind a paywall and result in debt.

Crisis Response and Violence Intervention Programs

The current approach to public safety, premised on punishment and rooted in racism, often falls short of keeping residents safe, while doing active harm to Black and brown communities through over-policing and unnecessary use of force. This was exemplified by the tragic death of Najee Seabrooks, who was shot and killed by Paterson Police earlier this year while experiencing a mental health crisis. Mental health crises are one of many situations where armed police are not the best equipped to respond. Even so, legislation that would have provided $10 million to fund new community-led crisis response teams did not make it into the final state budget, as the bill passed through the Assembly but has yet to be heard in the Senate.[lvii]

However, the state budget continues to invest in community-led violence intervention programs, which help resolve high-risk conflicts and disputes, connecting residents to needed supports and keeping them out of the criminal legal system. The FY 2024 budget includes $15 million — $10 million from the state and $5 million in federal funds — to support and expand the state’s existing community-based violence intervention programs.[lviii] Community-led responses are an evidence-based approach to improve public safety, centering restorative justice and harm reduction without resorting to armed police response.[lix]

In stark comparison, the FY 2024 budget includes far-greater investments in conventional policing across the state. Some examples include: Camden County Metro Police received $8 million for technology upgrades,[lx] the police headquarters in the Borough of Haddonfield received $5 million,[lxi] and the Paterson Police Department received $10 million.[lxii] Additionally, ARRIVE Together, the Attorney General’s crisis response initiative operated by State Police, receives roughly $10.6 million.[lxiii]

As the need for a non-police response to crises becomes increasingly evident, future budgets should prioritize funding for more community-based solutions.

Environment and Transit

Clean Energy Fund

 New Jersey’s Clean Energy Fund aims to help the state transition to 21st-century technologies that reduce our dependence on fossil fuels, cut air pollution, and save families money. However, more than $2 billion has been raided from the fund over the last decade, including $70 million in the new state budget.[lxiv] This is a minor improvement compared to the raid in last year’s budget, but every dollar raided makes it less likely New Jersey will meet its ambitious clean energy goals. If used as intended, the Clean Energy Fund will drive investments in areas like offshore wind and bus electrification, reducing air pollution and creating good-paying jobs across the state.

NJ Transit

NJ Transit is a cornerstone of mobility in New Jersey, providing residents with transportation to their jobs, doctors, schools, and more. But years of underfunding have left NJ Transit in a state of disrepair and passengers without a reliable source of transportation. The FY 2024 budget contains $2.87 billion for NJ Transit with no new fare hikes, but that does not tell the whole story.[lxv] The transit agency’s budget relies on expiring federal funds, diversions from the Clean Energy Fund, and it once again diverts NJ Transit’s capital funds to cover operating costs, transferring $334 million to cover routine maintenance.[lxvi] Without additional state funding, NJ Transit faces a $1 billion deficit by FY 2026 due lower than expected fare collections and federal pandemic assistance about to expire.[lxvii]

NJ Transit remains the only transit agency of its size in the United States without a reliable, dedicated funding source. If lawmakers do not act quickly to fully fund NJ Transit, the state may experience a transit death spiral, with drastic service cuts, fare hikes, and breakdowns that leave passengers stranded.[lxviii]

Conclusion: Sustainable Investments Need Sustainable Revenues

The investments made in New Jersey’s FY 2024 will pay great dividends in years to come. But sustainable tax revenue is required to maintain and build on these investments in future years. With tax collections already declining, even a small economic downturn could lead to reduced revenues that throw the state budget out of balance. Coupled with costly tax cuts and expiring federal pandemic relief funds, lawmakers may soon face difficult choices and potentially devastating cuts to programs and services.

A period of economic uncertainty is not the time to cut taxes for billion-dollar corporations or to direct tax giveaways to wealthy individuals and special interests. A strong tax code where those with the most pay what they owe is the only way to guarantee the promise of the budget’s investments for years to come.

End Notes

[i] The final approved appropriations in the FY 2024 Appropriations Act was $54,319,047,000 after the Governor’s line-item veto. See Governor Philip Murphy, Veto Message and Summary, A5669/S2024 (June 30, 2023), p. 2, https://d31hzlhk6di2h5.cloudfront.net/20230630/07/c4/38/35/b3a57fbddd9e9af6a3e5a3bd/FY2024_Veto_Message_and_Summary.pdf.

[ii] New Jersey Department of the Treasury, State of New Jersey, Month and Year-to-Date Cash Collections, Fiscal Year 2023 – May 2-23 versus 2022 (June 19, 2023), https://www.nj.gov/treasury/news/2023/pdf/MonthlyReport%20with%20Snapshot-FY23May.pdf.

[iii] See Office of Legislative Services, FY 2024 Appropriations Bill Scoresheet, June 30, 2023, p.1 https://pub.njleg.state.nj.us/publications/budget/Scoresheet,%20As%20Introduced.pdf.

[iv] Justin Theal & Alexandre Fall, Record State Budget Reserves Buffer Against Mounting Fiscal Threats, Pew Charitable Trusts, March 22, 2023, https://www.pewtrusts.org/en/research-and-analysis/articles/2023/03/16/record-state-budget-reserves-buffer-against-mounting-fiscal-threats.

[v] Sheila Reynertson, New Jersey Policy Perspective, Don’t Forget to Fix New Jersey’s Shrinking Rainy Day Fund, July 19, 2017,

https://www.njpp.org/publications/blog-category/lets-not-forget-to-fix-new-jerseys-shrinking-rainy-day-fund/.

[vi] The Governor’s FY 2024 Budget in Brief, hereinafter “FY 2024 Budget in Brief”, February 2023, p. 65, https://www.state.nj.us/treasury/omb/publications/24bib/BIB.pdf. The FY 2024 Budget in Brief is cited when budget allocations do not appear as specific line items in the Appropriations Act, Assembly Bill 5669, hereinafter “FY 2024 Appropriations Act.”

[vii] Sheila Reynertson, Stop the Sunset: Corporate Tax Cut Would Benefit the Biggest and Most Profitable Businesses, New Jersey Policy Perspective, Feb. 22, 2023, https://www.njpp.org/publications/report/stop-the-sunset-corporate-tax-cut-would-benefit-the-biggest-and-most-profitable-businesses/.

[viii] Peter Chen, New Jersey Policy Perspective, GILTI as Charged: New Corporate Tax Proposal Would Accelerate Tax Avoidance, April 6, 2023, https://www.njpp.org/publications/blog-category/gilti-as-charged-new-corporate-tax-proposal-would-accelerate-tax-avoidance/.

[ix] For more on this trend nationally, see Josh Bivens, Economic Policy Institute, Reclaiming Corporate Tax Revenues, April 14, 2022, https://epi.org/247534.

[x] Assembly Budget Committee Statement to Assembly Bill No. 1, June 28, 2023, https://www.njleg.state.nj.us/bill-search/2022/A1/bill-text?f=A0500&n=1_S2.

[xi] Peter Chen, New Jersey Policy Perspective, StayNJ 2.0: Senior Tax Cut Still 2 Regressive and 2 Expensive, Jun. 27, 2023, https://www.njpp.org/publications/report/staynj-2-0-senior-tax-cut-still-2-regressive-and-2-expensive/.

[xii] The Treasurer’s May Supplemental Budget Update showed total revenues of $52.8 billion in FY 2023, compared to $54.6 billion in expenditures. See New Jersey Department of the Treasury, FY 2024 Budget, May 17, 2023, p. 3, https://www.nj.gov/treasury/news/2023/pdf/TreasurersMayPacket.pdf. However, additional associated bills not included in the FY 2024 Appropriations Act, notably the Stay NJ property tax credit program, increased the total cost of the budget to $54.5 billion. See Press Release, Governor Phil Murphy, Governor Murphy Signs Fiscal Year 2024 Budget Into Law, June 30, 2023, https://nj.gov/governor/news/news/562023/approved/20230630f.shtml.

[xiii] New Jersey Transit Budget Proposal Transmittal, April 19, 2023, at Exhibit B, appendix D, p. 41, https://content.njtransit.com/sites/default/files/board/meeting_minutes/2023_04_19_OpenSessEXP.pdf.

[xiv] Linda Smith & Victoria Owens, Bipartisan Policy Center, States Face a $48 Billion Child Care Funding Cliff, June 3, 2022, https://bipartisanpolicy.org/blog/states-face-a-48-billion-child-care-funding-cliff/.

[xv] New Jersey Department of Education, Text Version: New Jersey One-Time Grants and Timelines Charts, (June 22, 2022), https://www.nj.gov/education/federalfunding/understanding/TextVersion_OneTimeGrants.shtml.

[xvi] For a summary of how economic austerity during the Great Recession harmed racial and economic equity, see Asha Banerjee & Emma Williamson, Center for Law and Social Policy, Fighting Austerity for Racial and Economic Justice, October 2020, https://www.clasp.org/wp-content/uploads/2022/01/2020_Fighting-Austerity-for-Racial-and-Economic-Justice.pdf.

[xvii] FY 2024 Budget in Brief, p.13; Office of Legislative Services, Fiscal Note, Senate, No. 3940, June 23, 2023, https://pub.njleg.state.nj.us/Bills/2022/S4000/3940_F1.PDF.

[xviii] Assembly Bill 3857, https://www.njleg.state.nj.us/bill-search/2022/A3857.

[xix] Peter Chen & Pat Garofalo, New Jersey Policy Perspective, Reel Regret: The High Cost of Expanding Film Tax Credits in New Jersey, June 26, 2023, https://www.njpp.org/publications/blog-category/reel-regret-the-high-cost-of-expanding-film-tax-credits-in-new-jersey/.

[xx] Senate Bill 2458, https://www.njleg.state.nj.us/bill-search/2022/S2458.

[xxi] FY 2024 Appropriations Act, p. 141, lines 31-33.

[xxii] New Jersey State Plan for Temporary Assistance for Needy Families (TANF) FY 2021-2023, at attachment B,  https://www.nj.gov/humanservices/dfd/programs/workfirstnj/tanf_2021_23_st_plan.pdf; Raymond Castro, New Jersey Policy Perspective, Promoting Equal Opportunities for Children Living in Poverty, April 13, 2020, https://www.njpp.org/publications/report/promoting-equal-opportunities-for-children-living-in-poverty/.

[xxiii] Center on Budget and Policy Priorities, TANF Policies Reflect Racist Legacy of Cash Assistance, 2021. https://www.cbpp.org/research/income-security/tanf-policies-reflect-racist-legacy-of-cash-assistance.

[xxiv] Press Release, Governor Murphy Signs Fiscal Year 2024 Budget Into Law, June 30, 2023, https://www.nj.gov/governor/news/news/562023/20230630f.shtml.

[xxv] Press Release, Governor Murphy Signs Fiscal Year 2024 Budget Into Law, June 30, 2023, https://www.nj.gov/governor/news/news/562023/20230630f.shtml.

[xxvi] Mark Weber & Bruce Baker, New Jersey Policy Perspective, School Funding in New Jersey: A Fair Future for All, November 17, 2020, https://www.njpp.org/publications/report/school-funding-in-new-jersey-a-fair-future-for-all/.

[xxvii] Bruce Baker & Mark Weber, New Jersey Policy Perspective, New Jersey School Funding: The Higher the Goals, the Higher the Costs, February 2, 2022, https://www.njpp.org/publications/report/new-jersey-school-funding-the-higher-the-goals-the-higher-the-costs/.

[xxviii] Pub. L. 2021, c. 132.

[xxix] New Jersey Department of Human Services, Response to OLS Questions, FY 2024 Budget, p. 9, https://pub.njleg.state.nj.us/publications/budget/governors-budget/2024/DHS_response_2024.pdf.

[xxx] FY 2024 Budget in Brief, p. 33.

[xxxi] FY 2024 Appropriations Act, p. 30.

[xxxii] FY 2024 Appropriations Act, p. 29.

[xxxiii] New Jersey Department of Human Services, Stay Covered NJ, Eligibility Unwinding, 2023, https://nj.gov/humanservices/dmahs/staycoverednj/unwinding/. Last accessed July 2023. Page on file with author.

[xxxiv] FY 2024 Appropriations Act, p. 275, line 36.

[xxxv] United States Department of Health and Human Services, 2023 Poverty Guidelines, https://aspe.hhs.gov/sites/default/files/documents/1c92a9207f3ed5915ca020d58fe77696/detailed-guidelines-2023.pdf; FY 2024 Appropriations Act, p. 275, lines 55-74.

[xxxvi] Amanda Holpuch, Medical Debt Is Being Erased in Ohio and Illinois. Is Your Town Next?, New York Times, Dec. 29, 2022, https://www.nytimes.com/2022/12/29/us/toledo-medical-debt-relief.html.

[xxxvii] Pub. L. 2021, c.375.

[xxxviii] FY 2024 Appropriations Act, p. 126, lines 36-41.

[xxxix] Heather Howard, New Jersey should increase Medicaid reimbursement rates for reproductive health care, New Jersey Globe, May 15, 2023, https://newjerseyglobe.com/health/opinon-new-jersey-should-increase-medicaid-reimbursement-rates-for-reproductive-health-care/.

[xl] FY 2024 Appropriations Act, p. 95, line 47. The Family Planning Services line-item was funded at $19,529,000 in FY 2022 and $30,029,000 in FY 2023. See FY 2024 Governor’s Detailed Budget, p. D-159, https://www.nj.gov/treasury/omb/publications/24budget/FY2024BudgetDetail-Full.pdf.

[xli] FY 2024 Appropriations Act, p. 163, p. 96, line 4, p. 160, line 35.

[xlii] FY 2024 Appropriations Act, p. 121, lines 31-39.

[xliii] Lilo Stainton, Not one, but two birthing centers in the works for Trenton, NJ Spotlight, October 26, 2022, https://www.njspotlightnews.org/2022/10/two-trenton-birthing-centers-maternal-infant-health-mortality-tammy-murphy/; FY 2024 Appropriations Act, p. 44, p. 202, lines 14-16.

[xliv] FY 2024 Budget in Brief, p. 29.

[xlv] FY 2024 Appropriations Act, p. 31.

[xlvi] Altarum Healthcare Value Hub, New Jersey Residents Worried about High Drug Costs; Support a Range of Government Solutions, 2023, https://healthcarevaluehub.org/advocate-resources/publications/new-jersey-residents-worried-about-high-drug-costs-support-range-government-solutions-1.

[xlvii] P.L.2023, c. 105. Bill text is available at https://www.njleg.state.nj.us/bill-search/2022/S1614.

[xlviii] P.L.2023, c. 79. Bill text available at https://www.njleg.state.nj.us/bill-search/2022/S3.

[xlix] P.L.2023, c. 106.

[l] FY 2024 Appropriations Act, p. 96, line 33; FY 2024 Governor’s Detailed Budget, p. D-161.

[li] FY 2024 Appropriations Act, p. 96, line 32.

[lii] FY 2024 Budget in Brief, p. 38.

[liii] FY 2024 Budget in Brief, p. 38.

[liv] Marleina Ubel, New Jersey Policy Perspective, The High Cost of “Free” Representation: Why New Jersey Should Eliminate Public Defender Fees, October 24, 2022, https://www.njpp.org/publications/blog-category/the-high-cost-of-representation-public-defender-fees/; Marea Beeman et al., National Legal Aid and Defender Association, At What Cost? Findings from an Examination into the Imposition of Public Defense System Fees, July 2022, pp. 98-99, https://www.nlada.org/sites/default/files/NLADA_At_What_Cost.pdf?v=2.0.

[lv] FY 2024 Budget in Brief, p. 41.

[lvi] P.L.2023, c. 69.

[lvii] Assembly Bill 5326, https://www.njleg.state.nj.us/bill-search/2022/A5326.

[lviii] FY 2024 Budget in Brief, p. 39.

[lix] New Jersey Policy Perspective, To Protect and Serve: Investing in Public Safety Beyond Policing, October 13, 2021, https://www.njpp.org/publications/report/to-protect-and-serve-investing-in-public-safety-beyond-policing/

[lx] FY 2024 Appropriations Act, p. 52.

[lxi] FY 2024 Appropriations Act, p. 49.

[lxii] FY 2024 Appropriations Act, p. 159, line 35.

[lxiii] FY 2024 Appropriations Act, p. 156, line 50, p. 153, line 34.

[lxiv] FY 2024 Budget in Brief, p. 99; Alex Ambrose, New Jersey Policy Perspective, Stop the Raids: The Clean Energy Fund Should Fund Clean Energy, Jan. 12, 2023, https://www.njpp.org/publications/report/stop-the-raids-the-clean-energy-fund-should-fund-clean-energy/.

[lxv] FY 2024 Budget in Brief, p 43.

[lxvi] FY 2024 Appropriations Act, p. 271, lines 19-20.

[lxvii] NJ Transit Board Minutes, April 20, 2023, appendix D, p. 41. https://content.njtransit.com/sites/default/files/board/meeting_minutes/2023_04_19_OpenSessEXP.pdf.

[lxviii] Elise Young, NJ Transit’s Creaky, Empty Trains Stir Worry of Fare Increases, Bloomberg, Feb. 24, 2023, https://www.bloomberg.com/news/articles/2023-02-24/nj-transit-delays-hit-record-high-despite-gov-murphy-pledge-to-fix-trains.

NJ Transit Needs Dedicated Funding, Not Service Cuts and Fare Hikes

Posted on by Alex Ambrose

Tonight, the NJ Transit Board of Directors will vote to adopt the agency’s budget for Fiscal Year 2024. With no source of dedicated funding in the state budget approved last month, the proposed NJ Transit budget continues to raid the Clean Energy Fund and divert capital funds to cover operating expenses. As the agency predicts a nearly $1 billion budget deficit in the coming years, the Murphy administration has signaled that they will prioritize service cuts and fare hikes before they consider additional state funding. In anticipation of tonight’s vote to adopt the budget, and with no movement from state lawmakers to fully fund NJ Transit, New Jersey Policy Perspective (NJPP) releases the following statement.

Alex Ambrose, Policy Analyst, NJPP:

“State lawmakers are failing NJ Transit and the millions of residents who rely on the agency’s buses and trains. Without additional funding from the state, riders are looking at steep fare hikes and service cuts that will have them paying more for less frequent and less reliable service.

“While a post-pandemic budget shortfall is not unique to NJ Transit, it remains the only agency of its size in the country without dedicated funding. It’s not like the money isn’t there. Lawmakers are poised to give the biggest and most profitable corporations a $1 billion tax cut at the end of this year, even though these funds can and should be used to fund NJ Transit. Across the river, New York avoided drastic service cuts by increasing taxes on corporations that benefit from public transit, and there’s no reason New Jersey can’t do the same.”

 

Costly Corporate Tax Cuts Overshadow and Threaten Good Budget Investments

Posted on by NJPP Staff

Today, the New Jersey Legislature voted on more than 200 bills, including the $54.3 billion budget for Fiscal Year (FY) 2024. The budget document was hastily written and approved Wednesday night, a mere minutes before triggering a state shutdown and without bill text available or an opportunity for the public to comment. Full of errors, omissions, and miscalculations, the budget will likely require “clean-up” legislation in the coming weeks. In response to the budget passing, New Jersey Policy Perspective (NJPP) releases the following statements.

On the lack of transparency and regressive tax cuts:

“It’s hard to evaluate this budget when it’s riddled with errors and needs to be corrected,” said Nicole Rodriguez, President of NJPP. “What we do know is that an overall lack of transparency rewarded big corporations and special interests at the expense of everyday New Jerseyans. With record revenues and a chance to make generational investments in the state, lawmakers prioritized a $1 billion corporate tax cut and hundreds of millions of dollars to Hollywood studios and real estate developers. Make no mistake, there are great investments in the budget worth celebrating, but they pale in size and scope to the tax cuts and credits given to the wealthy and well-connected. When corporations and wealthy households are allowed to skirt the tax system and do not pay what they owe, that leaves less funding for our schools, mass transit, and other public goods we all rely on. These short-sighted tax cuts threaten the future of New Jersey, especially as federal aid expires.”

On the doubling of the Child Tax Credit to a $1,000 max credit:

“The expanded Child Tax Credit will help more working-class families meet the high cost of living by putting cash back in their pockets,” said Peter Chen, Senior Policy Analyst at NJPP and author of a report on the benefits of an expanded Child Tax Credit. “Doubling the credit amount will help young children get the healthy and safe start they need to reach their full potential. Right now, one in ten children lives in poverty, despite New Jersey being one of the wealthiest states in the nation. Expanding the Child Tax Credit puts the state on a path to ending child poverty for good.”

On the elimination of public defenders’ fees:

“This is a huge win for the people of New Jersey that will move the constitutional right to an attorney out from behind a paywall,” said Marleina Ubel, Policy Analyst at NJPP and author of a 2022 report detailing the high cost of “free” legal representation. “New Jersey is one step closer to ensuring that justice is accessible to all, regardless of socioeconomic status.”

On the raid of the Clean Energy Fund:

“Lawmakers ignored environmental advocates, labor leaders, and sound research yet again,” said Alex Ambrose, Policy Analyst at NJPP and author of a report detailing the cumulative raids of the Clean Energy Fund. “Instead of using the Clean Energy Fund as intended, lawmakers continue a fourteen-year tradition of raiding the fund to plug unrelated budget holes. The Fund has now been raided by more than $2 billion since 2010, leaving behind those most vulnerable to the climate crisis and undermining the state’s own clean energy goals.”

On the cancellation of medical debt:

“Canceling medical debt will make New Jersey a leader in addressing the devastating challenges of our complex and broken health care system,” said Brittany Holom-Trundy, Senior Policy Analyst at NJPP. “Medical debt is a significant driver of the racial wealth gap and acts as an obstacle for far too many residents in getting the care they need. Uninsured and underinsured residents are more likely to have crushing debt and often avoid seeking necessary medical care as a result. Lawmakers should keep the momentum going and follow this up with policies addressing the structural issues in the health system that cause debt in the first place.”

New Jersey Budget Deal Gives to the Rich, Mortgages New Jersey’s Future

Posted on by Nicole Rodriguez

Today, the New Jersey Legislature released its budget proposal for Fiscal Year (FY) 2024. The $54.3 billion budget was made available to legislators after 11:00 PM and was quickly advanced out of the Senate and Assembly Budget Committees without publicly available bill text or an opportunity for anyone to testify. In response to the budget deal, New Jersey Policy Perspective (NJPP) releases the following statement.

Nicole Rodriguez, President, NJPP:

“This budget should have been an opportunity to make generational investments in schools, transit, affordable housing, and so much more, but lawmakers prioritized big tax cuts for the wealthy and well-connected instead. With so many families struggling to keep up with rising costs, this budget gifts a $1 billion tax cut to multinational corporations, creates new tax loopholes, and hands hundreds of millions of dollars to Hollywood studios and big developers. The promise of “affordability” for working families has taken a backseat to the interests of the wealthy and powerful.”

“Make no mistake, there’s a lot to celebrate in this budget, but it will be incredibly difficult to maintain adequate funding for the pension, public schools, the Child Tax Credit, and countless other public goods with less tax revenue. We’re already seeing tax collections coming in lower than expected, and with federal pandemic aid about to expire, New Jersey will soon face a fiscal cliff that we aren’t prepared for.”

For The Many NJ: Budget Deal Includes Too Many Corporate Giveaways

Posted on by NJPP Staff

Advocates, policy experts, and small business owners from For The Many NJ condemned the numerous corporate tax cuts and giveaways in the state budget proposal voted out of committee Wednesday night. The budget was advanced by the Senate and Assembly Budget Committees late in the evening, with zero public comment and text not available for the public to review before the $54.3 billion budget was voted on.

The budget deal includes a $1 billion corporate tax cut, an overhaul of the corporate tax code that makes it easier for companies to hide their profits overseas, and major expansions of tax credits for Hollywood studios and commercial developers that were snuck into the budget in the waning hours of negotiations.

Over the last few months, members of the For the Many NJ have urged lawmakers that everyday New Jerseyans, not big corporations, should be the focus of the budget: testifying at public hearings, meeting with NJ Transit riders, unveiling a scroll representing the ultra wealth of big corporations, and rallying in front of the offices of corporate lobbyists.

In a year with record-breaking tax collections, lawmakers failed to invest these funds in programs that families and small businesses rely one — like NJ Transit, affordable housing, the social safety net, and more — and instead diverted billions of dollars to corporate entities, their shareholders, and high-paid executives.

Antoinette Miles, Interim State Director, New Jersey Working Families Party:
“For months, advocates have urged lawmakers not to dole out billions of dollars in costly corporate tax handouts to companies like Amazon and Walmart. Trickle-down policies don’t work. They limit our ability to make investments that make New Jersey’s economy work for everyone and do nothing to ensure our state can maintain its fiscal footing.”

Nicole Rodriguez, President, New Jersey Policy Perspective (NJPP):
“It’s hard to evaluate this budget when it’s riddled with errors and needs to be corrected. What we do know is that an overall lack of transparency rewarded big corporations and special interests at the expense of everyday New Jerseyans. With record revenues and a chance to make generational investments in the state, lawmakers prioritized a $1 billion corporate tax cut and hundreds of millions of dollars to Hollywood studios and real estate developers. Make no mistake, there are great investments in the budget worth celebrating, but they pale in size and scope to the tax cuts and credits given to the wealthy and well-connected. When corporations and wealthy households are allowed to skirt the tax system and do not pay what they owe, that leaves less funding for our schools, mass transit, and other public goods we all rely on.”

Elizabeth Roque, member of Make the Road – New Jersey:
“The Legislature has given a billion dollar handout to the wealthiest multinational corporations like Amazon, while working families across New Jersey continue to suffer. The failure to extend the Corporate Business Tax Surcharge is a mistake that will have long-lasting, devastating consequences on families like mine who are struggling to make ends meet. A billion dollars would fix NJ Transit, provide a full Child Tax Credit to all kids in New Jersey, and help build more affordable housing. But instead, the Legislature today has chosen to line the pockets of the wealthiest corporations.”

Liz Glynn, Director of Organizing, New Jersey Citizen Action:
“Allowing the Corporate Business Tax Surcharge to expire benefits a handful of wealthy corporations at the expense of the vast majority of New Jerseyans. This could eventually lead to significant cuts in programs involving healthcare, education, the environment, transportation, and many other initiatives that help ensure working families in our state can thrive and prosper. It also puts future state leaders in the impossible dilemma of pitting our state’s financial health against the economic security of countless New Jersey families.”

J. Kelly Conklin, Founding Board Member, New Jersey Main Street Alliance:
“While there are certainly things to like in the budget legislation moving toward the Governor’s desk, the political calculus that includes massive revenue giveaways to a very small number of highly profitable corporations in the form of cutting the corporate tax rate doesn’t add up. Using calculus to disguise bad math never works in the long run. But while big, profitable corporations laugh all the way to their offshore bank accounts it will be small businesses that pick up the revenue shortfalls with tax increases and diminished public investment that impacts them, their customers and their employees.”

Marcia Marley, President, BlueWaveNJ:
“New Jersey’s economy is growing in part because of responsible stewardship from our Governor and the Legislature. That said, we are in danger of repeating our mistakes by creating a budget plan that will not weather the coming fiscal cliff. Instead the Legislature and Governor are making large tax relief plans which may not be sustainable and fail to target those who need it most.”

Amy Goldsmith, New Jersey State Director, Clean Water Action:
“Despite a looming fiscal cliff with federal funds depleting and a troubling economic clouds smoldering, the announced agreed upon budget is a reverse Robin Hood. Taking from the poor to give to the rich is unconscionable. Yet, that’s what’s on the table with fare hikes and service cuts being considered for NJ Transit, underfunding of the Earned Income Tax Credit, and $400 million raids on NJ Transit and the Clean Energy Fund that target the low income while millionaire businesses and McMansion homeowners get billions of dollars in new tax breaks and those with low incomes gets less.”

Dennis Trainor, CWA District 1 Vice President:
“After decades of administration after administration of both political parties failing to make the required full pension payment, we’re thrilled that – for the third time in a row – this budget makes the full pension payment. This will help bring retirement security for hundreds of thousands of current and former state workers. And that’s incredible. What’s not so thrilling is Trenton failing to extend the Corporate Business Tax Surcharge – in effect, incredulously rewarding corporate greed and robbing our state of more than $1 billion of revenue annually at a time when New Jersey continues to struggle funding crucial services like education, transportation and healthcare.”

Cliff Simms, Peter Simms, Dorothea von Moltke, Owners of Labyrinth Books and Great Jones Books:
“As the owners of two New Jersey family businesses, we are tired of hearing how small businesses are the engine of employment and economic growth while watching how large corporations are the beneficiaries of unwarranted tax breaks, which add proportionally little or nothing to the economy of New Jersey. Sunsetting the 2.5% surcharge on corporations that make over one million in net profits will eventually put more of a financial burden on small and medium sized businesses, which are still digging out of from the difficulties of the pandemic and have had to cope with, in its wake, rapidly rising wages as well as heightened inflationary costs. It seems obscene to give a handout to large corporations at a time when businesses on Main Street remain depressed and struggling while trying to do the right thing for employees.”

Rev. Sara Lilja, Director, Lutherans Engaging in Advocacy Ministry NJ (LEAMNJ):
“Does the state budget reflect our values? Tax breaks for wealthy corporations during this time of economic uncertainty is short-sided and immoral. The state budget must prioritize the needs of all; not just wealthy corporations! The economic engine of our state is our people. Hard working neighbors and friends continue to struggle to make ends meet each month, while contributing every day to the state’s economy. We have a moral obligation to plan for the future of families, and help all New Jersyans to thrive. Our state budget must reflect these values!”

Julie Borst, Executive Director, Save Our Schools NJ:
“New Jersey schools have been underfunded for over a decade. While the Murphy administration has made great strides in getting us to full funding, we do not see how it will be possible to maintain without the largest corporations paying their fair share of taxes. These same corporations have benefitted from significant federal tax cuts and they have benefitted from New Jersey’s well-educated population. They should contribute to support the system that produces those people. Without this funding, homeowners can expect to have to make up the difference.”

Philip Hensley, Democracy Policy Analyst, League of Women Voters of New Jersey:
“In the middle of the night, the legislature passed a budget giving away billions to big corporations. And the process was as flawed as the budget itself: no public testimony was allowed, legislators voted without seeing the final text, and because of rushed drafting the budget’s numbers don’t even add up. While this budget does invest in some laudable programs, for example by increasing the Child Tax Credit, this budget misses the opportunity to fund New Jersey’s future. This continues a worrying trend in Trenton of passing damaging legislation in the dark. From laws gutting campaign finance limits, to secretive last-minute amendments, to a budget that nobody saw and an assault on OPRA, New Jersey residents are noticing an anti-transparency streak in Trenton. With this budget, an opaque process has once again produced short-sighted and inadequate legislation.”

# # #

For The Many NJ is a statewide coalition of more than 30 organizations working to expand funding for essential services and improve budget practices to meet current and future needs, especially for communities that have been historically marginalized.

StayNJ 2.0: Senior Tax Cut Still 2 Regressive and 2 Expensive

Posted on by Peter Chen

The latest draft of StayNJ, a proposal to credit home-owning seniors for up to half of their property tax bills, would still direct the largest benefits to wealthy households while providing much less to lower-income homeowners and renters. Despite amendments that lower the maximum tax credit and add a much-needed income cap on eligibility, the new proposal still ties the total benefit to property taxes paid, resulting in the biggest tax cuts going to people with high incomes who own the most valuable homes.

As written, the proposal would make New Jersey’s tax code more regressive and worsen the racial wealth gap. It would also come at an enormous cost to the state, with a total price tag of $2.2 billion at a time when the state can ill afford it.

1. Still Regressive

The new StayNJ proposal, a compromise between Governor Murphy and legislative leaders, has been modified to include an income cap of $500,000 and a lower maximum benefit of $6,500. These changes fail to address the fundamental flaw at the heart of StayNJ: By tying benefit amounts to total property tax bills, the program directs larger payments to owners of larger, higher-valued homes. Further, an income cap of $500,000 still includes many high-income seniors with substantial wealth and economic advantages. To put this new income cap in perspective, it is double that of the state’s ANCHOR property tax rebate, which phases out at $250,000 in annual income.

The majority of StayNJ benefits would still go to the top 40 percent of households, leaving lower-income seniors with much less. In total, 28 percent of benefits would go to the top 20 percent of households, while those in the bottom 20 percent would receive only 7 percent of the benefits. As long as the program continues to disproportionately benefit homeowners at the expense of renters, and direct bigger benefits to those with more valuable homes, it will continue to reward the rich at the expense of the rest of the population.

Even with an additional $250 payment for seniors who rent included in the proposal, renters would still receive thousands less than their wealthier home-owning peers. The average benefit for seniors in the top 5 percent (with incomes of at least $360,000) would be $4,508, while seniors in the bottom 20 percent (with incomes less than $26,000) would receive an average benefit of $369. Because renters are disproportionately nonwhite and have lower incomes on average, the new StayNJ program would still widen the racial wealth gap.

2. Still Expensive

Based on modeling of income and homeowner data, NJPP estimates the program’s cost at $1.9 billion for the homeowner component alone, with another $300 million in ANCHOR payments for a total cost of $2.2 billion per year. With declining tax collections, federal pandemic aid set to expire, and no revenue source to pay for StayNJ, this proposal will make it extremely difficult for lawmakers to balance the state budget in future years.

Good Intentions, Poor Execution

The new StayNJ proposal remains too regressive and too expensive, directing the biggest benefits to already-wealthy households. Whatever its good intentions, StayNJ will put more in the pockets of those who need it least, while doing little to support the low-income seniors most at risk of losing their homes.

Reel Regret: The High Cost of Expanding Film Tax Credits in New Jersey

Posted on by Peter Chen

New Jersey lawmakers are fast-tracking a major expansion of the state’s film and television tax credit program — a move that would cost the state $200 million annually and erode critical safeguards against abuse.

The proposal, S3748/A5091, has four major drawbacks that will increase costs to the state, erode safeguards against abuse, and make it impossible to project the total costs of approved projects. The bill doubles down on the faulty premise that film and TV tax credits benefit the broader economy when mounting evidence and the experiences of other states suggest otherwise.

Extensive research of similar programs across the country finds that film and TV tax credits do not generate the economic activity and job creation they promise. Because most jobs in the industry are temporary and often filled by specialists from out-of-state, film and TV tax credits only deliver pennies on the dollar for state and local governments. Further, these tax credits often do not reimburse actual production costs, and instead are traded and transferred to other corporations, acting as free money for the film production companies. This is a bad investment for New Jersey, especially when the $200 million in funding could go towards public programs and infrastructure projects that directly support families and small businesses.

Given the substantial evidence that film tax credits do not generate the promised economic benefits, coupled with New Jersey’s own long history of corporate tax credit abuse, lawmakers should pull the plug on this costly proposal.

The Four Major Flaws in the Film and TV Tax Credit Expansion Bill

Increases Annual Spending by $200 million
Despite a negative return on investment, the proposal increases annual spending by $200 million annually. This would pit New Jersey against larger states that have recently expanded their own tax credit programs in a costly race to the bottom that only benefits Hollywood studios. To put the increase in perspective, it is roughly 50 percent larger than the governor’s proposed doubling of the child tax credit, a direct investment to support families in New Jersey. Subsidizing profitable Hollywood studios is the wrong policy choice when the state could be strengthening its infrastructure and human capital instead.

Allows New Jersey to Directly Invest in Movie Studio Facilities
The bill includes $30 million for capital spending, putting New Jersey on the hook as a direct investor in private movie studio facilities. If these ventures are profitable, then they should not need state subsidies. If they are not profitable, the state should not be propping them up and liable for losses if the studios fold.

Weakens Accountability Rules and Opens the Door to Abuse
In current law, if a film project costs less than $50 million in production expenses, the amount of the credit is reduced accordingly to prevent studios from overpromising and under-delivering. The new proposal would repeal this. Strong clawback measures are critical to ensure that tax credits at least yield the economic activity promised by the corporate beneficiary.

Stretches Deferred Compensation Over Two Years, Making Costs Impossible to Project
Film and TV tax credits are normally a percentage of a project’s expenses in any given year. If the expenses reimbursed by tax credits can be deferred into future years, the state will be on the hook for additional payouts with no way to estimate or anticipate those costs. To the extent that tax credits are needed at all, they should be covering costs in the current year, not costs the studio has chosen to defer to the future.

Mounting Research Shows Film and TV Tax Credits Provide Little Payoff

There is a growing consensus among independent economists that film and TV tax credits are a bad investment for state and local governments. These findings are mirrored in studies by non-partisan legislative offices across the country. A recent analysis by Maryland’s non-partisan legislative services found “for every $1 in film tax credits awarded, the State recoups just over 6 cents,” an abysmal 6 percent return on investment. Worse, the report found that the millions in tax credits failed to make sustainable economic development in the short- or long-term.

Below are eight major economic studies showing the high cost and minimal return on investment from film and TV tax credits.

Do Movie Production Incentives Generate Economic Development?
Kennesaw State economist J.C. Bradbury in 2018 noted that “The results indicate that neither [movie production incentives] in general, nor specific types or levels of tax credits, are associated with state economic performance.” The study analyzed tax credits across jurisdictions and time frames and found state film and television tax credits produced a negative return on investment, with the average return totaling just 27 cents per dollar spent.

Evaluation of the Maryland Film Production Activity Tax Credit
A 2015 report on Maryland’s film and television tax credit by the state’s Department of Legislative Services found the credit provided just 10 cents (and only 6 cents in state tax revenue) per dollar spent by the state. Beyond that, the employment effect was minimal: “The state is actually worse off in the later years as there are fewer jobs compared to if there was no credit.”

Lights, Camera, but No Action? Tax and Economic Development Lessons From State Motion Picture Incentive Programs
University of Southern California professor Michael Thom’s 2016 paper found minimal to no impact on employment from film and television tax credits. “We looked at job growth, wage growth, states’ share of the motion picture industry, and the industry’s output in each state. On average, the only benefits were short-term wage gains, mostly to people who already work in the industry. Job growth was almost non-existent. Market share and industry output didn’t budge.”

Do State Corporate Tax Incentives Create Jobs? Quasi-experimental Evidence from the Entertainment Industry
In a 2019 study, Thom followed up his 2016 paper to analyze the employment effects of film and television tax credits. He concluded: “Results mostly show no statistically significant effects.” Thom’s results aligned with the consensus view among economists that “as an economic development strategy, targeted incentive programs that carry large tax expenditures fail to encourage meaningful job creation.”

Do Tax Incentives Affect Business Location and Economic Development? Evidence From State Film Incentives
A National Bureau of Economic Research working paper in 2019 found that filming locations do change based on financial incentives, but that “there is no meaningful effect on feature films, and employment, wages, and establishments in the film industry and in related industries.”

State Film Subsidies: Not Much Bang For Too Many Bucks
The Center for Budget and Policy Priorities’ Robert Tannenwald found in 2010 that “[s]tate film subsidies are a wasteful, ineffective, and unfair instrument of economic development. While they appear to be a ‘quick fix’ that provides jobs and business to state residents with only a short lag, in reality, they benefit mostly non-residents, especially well-paid non-resident film and TV professionals.”

Motion picture production incentives and filming location decisions: a discrete choice approach
In the Journal of Economic Geography in 2018, Mark Owens and Adam Rennhoff write: “We fail to find strong evidence that incentives create a more permanent movie industry in a state.”

Policy Convergence, State Film-Production Incentives, and Employment: A Brief Case Study
Richard Adkisson in the Journal of Economic Issues in 2014 found that “Ultimately, the evidence suggests that state efforts to attract film-production employment were largely ineffective.”

Film Tax Credit Expansion is a Bad Investment for New Jersey

Posted on by Peter Chen

On Tuesday, the Senate Budget and Appropriations Committee advanced an overhaul of New Jersey’s film and television corporate subsidy program (S3748), increasing the annual maximum tax credits by at least $200 million and watering down the existing program’s accountability provisions. The bill was voted out of committee despite the lack of fiscal note or any indication of the overall cost of the program. In response to the bill advancing through committee and the bill text finally available to the public, New Jersey Policy Perspective (NJPP) releases the following statement.

Peter Chen, Senior Policy Analyst, NJPP:

“Handing union-busting Hollywood studios hundreds of millions of dollars in subsidies is a bad investment for New Jersey. Study after study shows that the cost of film tax credits overwhelmingly exceeds the benefits, as the jobs created are temporary and often go to specialists from out-of-state. At a time when New Jersey is facing upcoming budget shortfalls, cutting a check to movie and television companies will enrich high paid executives and corporate shareholders at everyone else’s expense. And by watering down accountability measures, lawmakers risk turning a bad investment into an even worse one if the proposed jobs and spending never materialize.

“New Jersey’s budget should prioritize public investments that we all rely on and benefit from, rather than lining the pockets of big businesses.”

Stay Away from StayNJ: Proposal Cuts Taxes for the Rich, Leaves Low-Income Seniors Behind

Posted on by Peter Chen

Housing affordability is one of the most pressing challenges facing New Jersey, but not all policies aimed at making the state affordable are equally effective, efficient, or equitable. When evaluating new proposals and changes to the tax code, it’s critical to consider who stands to benefit, by how much, and who is left behind. In other words, “Affordable for who?”

The newly proposed property tax cut for seniors, StayNJ, has a laudable goal of helping seniors who are struggling with high costs stay in their homes. However, by the program’s very design, StayNJ would accomplish the exact opposite by providing huge tax cuts to the wealthiest homeowners in the largest homes, while providing little-to-no benefit to the lowest income homeowners and renters.

With no income cap on eligibility, higher tax cuts for more expensive homes, and no credit for renters, the StayNJ proposal represents a massive transfer of wealth and state resources to those who already have the most. As currently written, the proposal diverts billions of dollars away from much-needed investments in schools, transit, health care, and infrastructure we all rely on just as federal pandemic aid expires and state revenue collections decline.

Despite its name, A1 is decidedly second-rate when it comes to helping make New Jersey affordable for all.

1. StayNJ is Robin Hood in Reverse: Wealthy Residents Would Benefit the Most

The proposed tax cuts from StayNJ would benefit the wealthiest New Jersey residents the most and the lowest-income residents the least. According to an NJPP analysis of modeling from the Institute on Taxation and Economic Policy (ITEP), the top 1 percent of New Jersey residents would receive the an average tax cut of $2,688, while the lowest-income 20 percent would receive a mere $103, largely due to the high percentage of low-income residents who rent.[1] Among those who would receive a tax cut from StayNJ, the average cut for those in the top 1 percent is roughly three times the average tax cut for those in the bottom 40 percent.

When looking at the total cost of the proposal — $2.2 billion, according to ITEP’s modeling — roughly 40 percent would go to the wealthiest 20 percent of residents, while only 5 percent would go to the lowest-income 20 percent of residents. The top 1 percent of residents alone would get a bigger share of the benefits than the entire lowest-income 20 percent.

Considering the structure of StayNJ, it’s not surprising that the proposal disproportionately benefits those with the highest incomes.

In order to get the maximum tax cut of $10,000, a homeowner must pay $20,000 in property taxes, a rare occurrence reserved for the highest-valued homes. For reference, the average property tax bill in New Jersey is less than half that amount.[2]

As a result, the average homeowner in Alpine (average home value of $2.8 million) would receive $10,000. Meanwhile, the average homeowner in Trenton (average home value of $62,863) would receive $1,700.[3]

It’s worth noting that this analysis does not account for the residents who already receive property tax credits through ANCHOR and the Senior Freeze — which each have income limits on eligibility — meaning fewer low- and middle-income seniors would receive benefits under StayNJ. As written, the StayNJ benefit is half off a senior’s property tax bill, or their Senior Freeze and ANCHOR benefits combined, whichever is more.[4]

Add it all up and the lion’s share of the StayNJ benefit would go to the wealthy, with bigger benefits the wealthier the taxpayer. This undermines the state’s progressive tax code and the principle that government benefits should flow towards those with the least, not those with the most.

2. StayNJ Fails to Accomplish Its Stated Goal by Leaving Renters and Low-Income Seniors Behind

Seniors on fixed incomes often have a difficult time keeping up with rising costs, and there is evidence that New Jersey’s low-income seniors need additional financial help. The poverty rate for seniors in New Jersey (9.2 percent) is actually higher than the poverty rate for other adults (9.1 percent).[5]

The StayNJ proposal leaves many of these low-income seniors behind, however, as the program excludes renters entirely. Renters have significantly less wealth and lower incomes than their home-owning peers. Renters also make up a substantial percentage of New Jersey’s senior population: Roughly one in five New Jersey seniors rent their homes, including more than half of Hispanic/Latinx and Black seniors.[6] Given the disparities in homeownership, this proposal will widen the racial wealth gap instead of helping close it. As noted in the appendix, senior renters number in the thousands in each legislative district.

With lower incomes, less wealth, and no equity in their home, seniors who rent are at high risk of being priced out and evicted.[7] This is illustrated by recent Census survey data showing that one in five New Jersey senior renters reported missing the last month’s rental payment.[8]

The concentration of homeownership in wealthier income brackets is clear when looking at how many people in each income range would qualify for StayNJ. Of those in the top one percent of earners in New Jersey, 40 percent would receive a tax cut from StayNJ, while a mere 5 percent of those in the lowest-income quintile would receive anything.

Beyond the exclusion of renters, this program may actually make senior housing affordability more challenging. Research shows property tax cuts for wealthy homeowners can stifle housing development and growth, stagnating the housing market and decreasing affordability, as Proposition 13 did in California.[9]

Instead of a tax cut targeted to wealthy homeowners, state lawmakers have other avenues to help reduce senior poverty: expanding outreach for enrollment in food assistance programs like SNAP, reducing health care and prescription drug costs, and increased funding for rent assistance,[10] foreclosure assistance, and housing counseling.

Using the tax code to assist seniors with high costs can only be successful if the changes are targeted to help those who need it most. StayNJ fails to do so.

3. StayNJ Threatens New Jersey’s Fiscal Health

During the Murphy administration, state lawmakers have made great progress towards fixing New Jersey’s financial health after years of mismanagement and not paying the bills. Thanks to a series of full pension payments, increased taxes for millionaires and the most profitable corporations, and strong investments in key factors that promote economic growth like public schools and infrastructure, the state finds itself on solid fiscal footing for the first time in decades.[11]

But StayNJ would jeopardize this progress by pouring billions of dollars into the hands of those who need it least, all without a revenue source to pay for it. To put the sheer size of StayNJ in perspective, its $1.2 billion sticker price is roughly equivalent to the entire budget for the state Department of Health.[12] The bill also lacks funding for administrative costs associated with the new program at the local or state level, which could balloon the cost even further. The $1.2 billion fiscal note for StayNJ may also be an undercount: The Murphy administration estimates that the annual cost is closer to $2 billion, and NJPP’s analysis indicates a cost of $2.2 billion for the state, though we were unable to model the impact of ANCHOR given the lack of public data on who has received tax credits through the new program thus far.

This expensive proposal takes place against a backdrop of reduced revenues and tax cuts for billion-dollar corporations. The Treasury forecast already anticipates $2 billion less in revenue collections over Fiscal Years 2023 and 2024.[13] And those forecasts do not include $1 billion in annual revenue that will be lost if lawmakers cut the corporate tax rate at the end of the calendar year, as they are poised to do.[14] Even a small economic downturn could wipe out the already-tenuous state surplus and make it difficult for lawmakers to balance future budgets without severe cuts to other programs and services.

There are More Efficient and Effective Ways to Help Seniors Stay in New Jersey

When designing policies to make the state more affordable for seniors, lawmakers should target support to the residents who need the most help. Instead, StayNJ would do the opposite by targeting benefits to New Jersey’s wealthiest households while leaving many low-income seniors behind entirely. The program’s poor design, coupled with its billion-dollar price tag and lack of a funding source, should have lawmakers looking for other ways to help seniors stay in New Jersey.

Appendix: Senior Renters by Legislative District

Source: U.S. Census Bureau, 2020 Demographic and Housing Characteristics Table H13

End Notes

[1] NJPP analysis of Institute on Taxation and Economic Policy modeling. Data on file with author.

[2] NJ Dep’t of Community Affairs, 2022 Property Tax Information (2023), https://www.nj.gov/dca/divisions/dlgs/resources/property_docs/22_data/22taxes.xls

[3] NJ Dep’t of Community Affairs, 2022 Property Tax Information (2023), https://www.nj.gov/dca/divisions/dlgs/resources/property_docs/22_data/22taxes.xls

[4] Derek Hall, N.J. senior tax relief bill fueling sudden drama and talk of state shutdown. Here’s what’s in it., NJ.com, May 28, 2023, https://www.nj.com/politics/2023/05/nj-senior-tax-relief-bill-fueling-sudden-drama-and-talk-of-state-shutdown-heres-whats-in-it.html

[5] Kaiser Family Foundation, Poverty Rate by Age, 2021, https://www.kff.org/other/state-indicator/poverty-rate-by-age/?currentTimeframe=0&sortModel=%7B%22colId%22:%2265%2B%22,%22sort%22:%22desc%22%7D.

[6] U.S. Census Bureau, 2020 Demographic and Housing Characteristics: H13B (Black), H13D (Asian), H13H (White Non-Hispanic), H13I (Hispanic/Latino).

[7] Annie Nova, He’s 75 and facing eviction. Many other older renters are, too. CNBC.com, June 22, 2021, https://www.cnbc.com/2021/06/22/millions-of-renters-may-soon-be-evicted-heres-one-familys-story-.html

[8] U.S. Census Bureau, Household Pulse Survey Week 57 (April 26 – May 8, 2023), Housing Table 1b, https://www2.census.gov/programs-surveys/demo/tables/hhp/2023/wk57/housing1b_week57.xlsx

[9] İmrohoroğlu, Ayşe, Kyle Matoba, and Şelale Tüzel. 2018. “Proposition 13: An Equilibrium Analysis.” American Economic Journal: Macroeconomics, 10 (2): 24-51. https://www.aeaweb.org/articles?id=10.1257/mac.20160327

[10] Will Fischer, Douglas Rice & Alicia Mazzara, Center on Budget and Policy Priorities, Research Shows Rental Assistance Reduces Hardship and Provides Platform to Expand Opportunity for Low-Income Families, Dec. 5, 2019, https://www.cbpp.org/research/housing/research-shows-rental-assistance-reduces-hardship-and-provides-platform-to-expand.

[11] Christian Wade, New Jersey receives ratings upgrade over ‘solid’ recovery, The Center Square, Apr. 7, 2023,  https://www.thecentersquare.com/new_jersey/article_8f8ef360-d550-11ed-b2e5-4b80b8a6a8b7.html

[12] State of New Jersey, Budget in Brief: Summary of Budget Recommendations, Fiscal Year 2024, https://www.state.nj.us/treasury/omb/publications/24bib/BIB.pdf at p. 70.

[13] Derek Hall, N.J. tax revenues plummet billions below Murphy budget estimate. Are the good times over?, NJ.com, May. 18, 2023, https://www.nj.com/politics/2023/05/nj-tax-revenues-plummet-billions-below-murphy-budget-estimate-are-the-good-times-over.html

[14] State of New Jersey, Budget in Brief: Summary of Budget Recommendations, Fiscal Year 2024, https://www.state.nj.us/treasury/omb/publications/24bib/BIB.pdf at p. 65.

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