The state Legislature will hold committee votes on Tuesday for its version of a nine-month spending plan to cover expenses between Oct. 1, 2020, and June 30, 2021, after the COVID-19 pandemic wreaked havoc on the state’s economy and its finances.
Under the proposal, lawmakers will consider just three taxes sought by Gov. Phil Murphy in his own budget proposal: A tax on income above $1 million, a four-year extension to a higher version of the corporate business tax, and an HMO assessment on net written premiums, according to a person in the state Legislature.
The budget will include roughly $4.5 billion – above the original $4 billion proposed – in potential borrowing, according to this person, which can be done without voter approval thanks to wartime powers granted to the governor. But that amount must still be approved by a four-person legislative committee, consisting of the Assembly Speaker, Senate President and the Assembly and Senate budget chairs. Like with the budget, this must also be done by the Sept. 30 deadline, and per a New Jersey Supreme Court ruling, the state has to certify that it actually needs to borrow that amount.
Also at play in budget negotiations: A difference of $1.3 billion between what the state Treasury and the non-partisan Office of Legislative Services think New Jersey will have next June, which has essentially been split down the middle, according to the source familiar with the matter. The two sides are agreeing that the end-of-year balance will end up somewhere between the lower projections from the Murphy administration and the higher end-of-year balance from the state Legislature’s financial analysts.
It is not clear how much the spending plan proposed by lawmakers will clock in at. After Tuesday’s hearings, it is scheduled for a full floor vote in both chambers on Thursday, after which it heads to Murphy’s desk.
The governor has the option to sign it, reject it entirely, send it back to lawmakers, or sign it while removing spending proposals inserted by lawmakers. Murphy will have to sign a budget by Sept. 30, otherwise the state constitution requires him to enact a state shutdown until a spending plan is enacted.
The governor’s proposed taxes on cigarettes, opioid manufacturers, bear hunting permits, firearms and ammunition sales, limousine services, and boat and yacht rentals have all been taken out, according to multiple sources.
Assembly Speaker Craig Coughlin, D-19th District, and Senate President Stephen Sweeney, D-3rd District – the most powerful elected officials in the state Legislature – were not available to comment after an unrelated event Monday afternoon at the statehouse building in Trenton.
Murphy, when asked during his COVID-19 press briefing later that afternoon, would not comment.
Lacking from the budget will be Murphy’s landmark “baby bond” proposal, according to sources, and a Monday report from The Bergen Record.
The proposal calls for a $1,000 savings bond for every New Jerseyean born into qualifying families starting in 2021. A family of four that earns 500 percent the federal poverty level – $131,000 – would be eligible, according to the state Treasury. That newborn, upon its 18th birthday, would be able to access the money. The state treasury estimates 72,000 babies will be born in 2021 to families that will qualify for the state aid, coming out to $72 million.
All told, Murphy’s spending plan clocks in at $32.4 billion to cover expenses for the next nine months.
His proposed millionaire’s tax would bring in $390 million for the state through the middle of 2021 by increasing the income tax rate for earners over $1 million from 8.97 to 10.75 percent.
Part of the deal with lawmakers for that increase calls for a $500 rebate to tens of thousands of middle-class families – those with income below $150,000 – that could cost the state $325 million, therefore only really coming out ahead with $65 million.
A four-year extension to the 2.5 percent CBT surtax, tacked onto the 9 percent rate levied on the state’s highest-earning businesses, rather than letting it sunset to 1.5 percent for two years before expiring, is slated to bring in $210 million.
Meanwhile, an increase of the HMO assessment on health plans would bring in more than $100 million for the state.