NJ’s budget awash in cash, though probably not for long
TRENTON – New Jersey’s state budget is awash in cash for the first time in a generation, but there’s a good chance it won’t last long.
The Murphy administration forecasts that it will end the current fiscal year with a combined surplus of $6.34 billion, but its 2022 spending plan uses much of that to offset spending. Next year’s budget has a projected year-end balance of $2.2 billion.
Thomas Koenig, the legislative budget and finance officer for the Office of Legislative Services, said in addition to expenditures in fiscal 2022 exceeding anticipated revenues by nearly $4 billion, more than $700 million in federal COVID aid that offsets state spending in the coming year won’t recur.
Revenue will grow in fiscal 2023 to narrow that gap, but Koenig said that year’s budget could need “significant revisions to spending and revenue policies.”
“Clearly we have a fiscal cliff with the current budget plan that we are headed for in fiscal ’23. If nothing else changes, we have a significant deficit heading into ’23,” Koenig said.
“But the significant additional federal assistance the state is about to receive under the American Rescue Plan act may push the tough choices speech beyond fiscal ’23,” he said, referring to the $6.4 billion in nearly unrestricted federal aid coming to the state in the near future.
Sen. Troy Singleton, D-Burlington, said one would think the state would look to bank more money with talk of a fiscal cliff coming. Instead, it spends all $1.4 billion expected in the ‘rainy day’ fund.
“Let’s hope it doesn’t rain. Let’s hope it doesn’t rain if we’re going to do that,” Singleton said.
Sen. Steve Oroho, R-Sussex, said Gov. Phil Murphy's main budget priority is to win re-election.
“The Murphy administration has not been transparent about our state finances. They haven’t used the billions in federal relief or state surplus funds at their disposal to help people,” Oroho said. “And they’re setting New Jersey up for a major tax increase a year from now.”
The nonpartisan OLS budget office projects that the state will see $553 million more in revenues in the current and upcoming budgets than Murphy projected in February, including $428 million this fiscal year.
David Drescher, the revenue, finance and appropriations section chief, said that is “a significant gap” but reflects that OLS had two additional, strong months of tax collections to consider, as well as the new federal coronavirus recovery law.
“Our forecast now is higher than it would have been had we done it two months ago, and it may be higher still once we get some of that data that will come in later,” Drescher said.
Sen. Paul Sarlo, D-Bergen, said $553 million over two fiscal years is not “a real big number (or) a gamechanger.” But he said the size of the surplus – which was built in part on $4.3 billion from emergency borrowing – is an unexpected change.
“It’s remarkable, quite frankly,” Sarlo said. “Those numbers are quite – never in a million years I thought we’d be sitting here.”