TRENTON — New Jersey Gov. Phil Murphy is about to unveil his second budget and says this year’s spending blueprint will put forward “significant and sustainable savings,” though he offered little detail.
The first-term Democrat and former Wall Street executive is set to deliver his budget address Tuesday to a joint session of the Democratic-led Legislature.
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 the notion that his plan would lower the state’s property tax burden. He didn’t give specifics.
A closer look at the state’s fiscal picture and this year’s starting point:
Murphy’s first budget ended up quite different from the proposal he outlined early last year. The biggest changes were in how he financed it. Murphy, who campaigned as a liberal, called for raising the sales tax from 6.625 percent to 7 percent and hiking income taxes on millionaires to finance higher state aid to education, New Jersey Transit and public pensions.
But lawmakers had other plans. They balked at his proposed sales tax hike and pushed back against Murphy’s millionaires’ tax.
In the end, just before the deadline, Murphy and legislative leaders agreed to raise rates on those making more than $5 million a year and businesses that bringing in over $1 million.
This year, Senate President Steve Sweeney and Assembly Speaker Craig Coughlin have said they won’t support any new taxes.
How Murphy navigates that potential roadblock, coupled with rising fixed costs like the public pension, will be a key dynamic to watch.
The march toward legalization of recreational marijuana, which has support from Murphy and the top leaders in the Legislature, could affect the budget’s bottom line. Murphy penciled in modest revenue from marijuana sales in the current year’s budget, but legalization stalled. Legislative estimates showed about $300 million in revenue could be expected, though not all right away. That’s roughly the same amount of increased education aid that Murphy proposed last year. The latest is that Murphy and leaders have worked out key disagreements, particularly over tax rates and the makeup of a regulatory commission. But the legislation still faces votes in both chambers of the Legislature.
Murphy is also likely to press for reimagined corporate business incentives. The current crop of incentives was established under Republican Gov. Chris Christie and expires July 1. Murphy has made no secret of his opposition to the programs, because they committed the state to handing out $8 billion in tax incentives if certain benchmarks are met under the Christie-era programs.
Instead, Murphy has said he will propose incentives that cap awards.
Murphy also says he wants to continue to invest in the state’s beleaguered rail and bus line, New Jersey Transit. He also campaigned on “fully funding” a 2008 school funding formula that went unfunded under Christie. Estimates put the shortfall at about $1 billion annually in payments that must be made up. Last year, Murphy and lawmakers agreed on roughly $340 million in new spending for K-12 education and modified the funding formula.