Taxes, borrowing, spending — all up, up, up in NJ’s revised budget
TRENTON — Democrats have added $500 million more in borrowing and over $500 million more in spending to a 2021 state budget that’s balanced in part through more than $700 million in tax increases, mostly on millionaires and corporations.
The $32.7 billion, nine-month spending plan – which follows a $7.6 billion stopgap budget for the July through September period that typically starts a fiscal year – is on track for approval Thursday after its endorsement Tuesday in party-line votes by the Senate and Assembly budget committees.
Sen. Paul Sarlo, D-Bergen, who heads the Senate Budget and Appropriations Committee, said the budget is “not something we should celebrate.”
“Any time you have to raise any type of revenue, it is a difficult vote. I don’t care if you are a Democrat or a Republican,” Sarlo said. “Nobody takes it lightly whenever they have to raise revenues, and I am hopeful that is the end of raising any taxes or propose. I know me as the chairman will be very outspoken and opposed in the future.”
Republican lawmakers criticized some of the spending added to the budget, which includes $15 million for the Camden County Improvement Authority to demolish vacant property and other appropriations – sometimes called "Christmas tree" items – in Clark, East Brunswick, Edison, Franklin, Metuchen, Milltown, Newark, North Brunswick, Paterson and Wenonah, among other recipients.
“We see money for a golf course. We see money for a park, we see money for camp refurbishment, we see money for debris cleanup all added in. We see extra money for transitional aid to favored cities. Over and over and over again you see it,” said Sen. Steve Oroho, R-Sussex. “We heard about how bad everything had been, and now we see everything thrown into this budget.”
“And the spending here in this bill, of course it is filled with pork, when we’re pleading that, oh, we have virtually no money, we’re going broke and et cetera,” said Sen. Sam Thompson, R-Middlesex.
After tax collections plunged amid the business shutdowns ordered by Gov. Phil Murphy in response to the coronavirus pandemic, Murphy proposed that the state borrow as much as $9.9 billion to balance the operating budget. The Supreme Court ruled it is legal but that borrowing can’t exceed the deficit.
Murphy last month proposed borrowing $4 billion. Even though legislative budget analysts have since forecast that revenues would be higher than Murphy had projected, the final budget agreed to by the governor and legislative leaders relies on $4.5 billion in borrowing.
The state Treasury Department said Tuesday it has not yet decided if the $4.5 billion in general obligation bonds will be sold to the Federal Reserve Municipal Liquidity Facility or into the public markets and that they may be sold as either tax-exempt bonds or as taxable bonds.
Assemblyman John McKeon, D-Essex, said it’s good “to be going into this one with really basically a line of credit, most of which is getting squirreled away for the sake of not knowing what’s going to happen over the next several months. All predictions are such that we’re going to see a significant second wave. And that’s what it’s there for.”
The year-end surplus is projected at $2.5 billion, up $286 million from Murphy’s August budget plan.
Total appropriations are $297 million higher than Murphy’s August request – even after lawmakers cut the pension contribution around $200 million and deleted a plan to spend $40 million on "baby bonds."
Business groups said the final budget is disappointing, and not only because of the millionaires tax on income between $1 million and $5 million, expected to generate $390 million in fiscal 2021; extension of the 2.5% business tax surcharge, expected to generate $210 million this year and expire at the end of 2023; and raising the tax on net written premiums of HMOs from 3% to 5% to raise almost $103 million.
“We were worried about the level of borrowing at $4 billion, now it’s higher. We thought the surplus was unnecessarily high at what it was, now it’s higher. We thought that spending should remain flat, now it’s higher,” said Christopher Emigholz, vice president of government affairs for the New Jersey Business & Industry Association. “And so the business community has to ask, when is it going to stop? When is enough enough?”
Sen. Declan O’Scanlon, R-Monmouth, called the borrowing to balance the budget “horrific policy put forward by an irresponsible governor with the complete abdication of responsibility on the part of the Democrat Legislature.”
“Just when you thought things couldn’t get any worse, we careen from the merely shamelessly irresponsible into the bizarre world of outrageously destructive,” he said.
The bill raising the tax rate on income above $1 million from 8.97% to 10.75%, retroactive to Jan. 1, 2020, also creates a tax rebate of up to $500 to taxpayers with at least one dependent child, if their income is $75,000 or less for a single filer or $150,000 for a married filer.
That rebate would be paid each July, meaning the spending won’t come during the 2021 budget now being considered. It’s subject to annual appropriation by the Legislature, which prompted Republicans to call it an election-year gimmick that will only be paid once.
“We’re in a pandemic but we’re truly in a worse place than that if we pass this budget,” said Assemblywoman Serena DiMaso, R-Monmouth.
The revised budget also adds $135 million in higher education funding and restores $38 million in hospital funding and $15 million for horse racing subsidies. It adds $24.5 million in spending in the Department of Children and Families, including the restoration of $15 million for the school-linked services program.
“Thank you for restoring school-based youth services. Thank you for restoring community college funding. And thank you for adding additional funds for extraordinary special education aid,” said Francine Pfeffer, a lobbyist for the New Jersey Education Association. “Schools are going to support students who are facing more mental health challenges than ever before.”
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