Gov. Phil Murphy and legislative leaders have until the end of this month to agree on the next state budget that begins on July 1. Their budget plans and priorities differ sharply, so they’ve spent the last month trying to gain an edge in the coming negotiation.
Murphy would address New Jersey’s deteriorating finances with some tweaks to contracts agreed to by government worker unions, changes in state incentives for businesses and a new tax on those earning more than $1 million annually. He has used a task force on tax breaks to attack supporters of his chief legislative foe, Senate President Steve Sweeney, and union members have shut down a Sweeney press conference on his budget proposals.
Sweeney would start enacting legislation recommended by a bipartisan Economic and Fiscal Policy Workgroup comprised of economists, academics, government experts and legislators.
He and fellow legislative leaders have introduced a package of 27 bills to lower taxes, address New Jersey’s massive pension underfunding, reduce spending on health benefits and work toward consolidating school districts.
Murphy’s approach of seeking new taxes on the wealthy and legalized marijuana while strongly opposing any cuts to public-worker benefits is supported by government employee unions.
Sweeney, Assembly Speaker Craig Coughlin and many legislators are against new taxes and tax increases, especially this year with the entire Assembly up for re-election in November.
Instead, their bills are designed to fix the state’s fiscal crisis, restore stability to its pension system, and save taxpayers billions of dollars. Chief among the proposals, which Sweeney has spent the past year promoting around the state, are: • Create a hybrid pension plan for non-uniformed government employees who are new hires or have less than five years of service. Their first $40,000 of income would earn a traditional defined-benefit pension, and income above that would earn defined contributions with a guaranteed 4 percent annual rate of return and possible higher growth. • Merge the high-cost School Employees Health Benefits Plan into the State Health Benefits Plan, and shift all public employees from Platinum-level health care plans to Gold plans upon the expiration of current contracts. Public employers would be required to offer Bronze-level plans that charge employees no monthly premium. • Require school systems to develop regionalization plans to merge all K-4, K-6 and K-8 districts into K-12 regional school systems, and to coordinate curriculums and schedules of schools.
The Legislature’s proposed reforms are supported by the state’s largest business organization, the N.J. Business and Industry Association, and by the N.J. Society of Certified Public Accountants.
As we’ve said before, reforms of the magnitude proposed by the legislative leaders are required in light of New Jersey having the nation’s highest property taxes, second-largest unfunded pension liability, second-worst credit rating and fifth-highest overall tax burden, as Sweeney has noted. Failure to start dealing with New Jersey’s fiscal problems now would guarantee painful losses of services and funding for schools, transit, citizens in need and more.
Sweeney also said he would go around a potential veto by Gov. Murphy if necessary and put the core elements of the fiscal reforms to voters in a pair of constitutional referendums. He already has the best knowledge about support in the Legislature for the rival approaches, and that bold promise to bypass the governor as needed suggests he believes he could get voter support as well.
This month will tell and no doubt the rivals haven’t played all their cards yet, but it looks like the budget agreement will be long on fiscal reforms and short on new taxes.