Citing ballooning state debt and spending that far outpaces state revenues, a business group on Monday urged Gov. Phil Murphy to change pension and health care plans for public employees in his 2020 budget, which he is due to present to the Legislature on Tuesday.
The New Jersey Business & Industry Association also called on Murphy not to propose new or increased taxes in a state in which residents and businesses are already overburdened with tax bills.
The current year’s $37.4 billion budget expires July 1, and Murphy and lawmakers are required to have a balanced budget in place by then.
Murphy said last week during a Chamber of Commerce dinner in Washington that this year’s budget will be different from last year’s and teased that his plan would lower the state’s property tax burden. But he didn’t give specifics.
During a Feb. 28 speech to political and business leaders in Washington, Murphy said his next budget will seek “significant and sustainable savings,” while continuing to push for “tax fairness” — his catchphrase for a higher tax on millionaires. His proposal will continue investments in areas including education, workforce development and infrastructure, he said.
Last year, the state came close to a shutdown, as two camps in the Democrat Party argued over tax increases, and Murphy did not get his increased taxes on those making more than $1 million last year. Instead, only those who make more than $5 million saw an income tax increase to 10.75 percent.
“They support tax increases at great risk to their political careers,” said Senate President Steve Sweeney, a Democrat from West Deptford who led the blockade of a millionaire’s tax and some other Murphy initiatives last year. “This state could easily go back to the Republican Party if we don’t pay attention and focus on fiscal health.”
NJBIA on Monday released “New Jersey’s Financial Cliff” — a report on audited state revenues, expenses and debt — using data from the state’s Comprehensive Annual Financial Reports from 2007-2017.
It found that state expenses have significantly outpaced state revenues and state debt has increased by 382 percent over the last 10 years, according to NJBIA President & CEO Michele Siekerka.
For this fiscal year, which ends June 30, Murphy counted on 7.5 percent overall revenue growth to balance the budget.
Through January, growth was 3 percent, putting the state $740 million behind, according to a Feb. 25 report by S&P, which ranks New Jersey debt A-, the seventh-highest investment grade.
The FY 2019 state budget forced $1.6 billion in higher taxes on New Jersey businesses and residents to cover state expenses, Siekerka said.
“We cannot afford to continue down this same road with the FY 2020 budget,” she said.
New Jersey’s combined net pension liability and post-employment benefit obligation is currently $151.6 billion — four times the state’s annual budget. These obligations will increase by $1 billion a year if nothing is done, according to NJBIA.
NJBIA urged the governor to transfer state and local government employees from the current platinum-level health coverage to gold coverage, calling the gold plan “comparable to what most of the best private sector companies in New Jersey offer their employees.”
The group also supported the New Jersey Economic & Fiscal Policy Workgroup’s recommendation to shift all new public and not-yet-vested public workers out of the current defined retirement benefit plan. Instead, NJBIA recommended a cash-benefit plan, or hybrid retirement benefit that provides a pension for the first $40,000 of earnings and a 401(k)-style account for additional income.
Last year, New Jersey businesses were hit with an increase in the Corporate Business Tax and the Gross Income Tax, which affects pass-through businesses whose owners pay taxes on business income through their personal tax returns, Siekerka said.
Since then, businesses have also faced absorbing other costly state mandates, she said, including a $15 minimum wage, enhanced paid sick leave and expanded paid family leave mandates, higher energy delivery costs and fees from renewable energy efforts.
The Associated Press and Bloomberg contributed to this report.