NJ budget: Shutdown unlikely, but all options on the table (Analysis)

As lawmakers send Gov. Phil Murphy a budget that does not include his demanded millionaires' tax hike or higher taxes on companies and gun owners, Murphy is questioning the math Senate President Steve Sweeney and Assembly Speaker Craig Coughlin are using to balance their spending plan.

The Sweeney/Coughlin plan is roughly the same size as the $38.9 billion budget Murphy put forth, but does not include any of his proposed tax hikes. Lawmakers have also nixed some of Murphy's priorities (like tuition-free community college) and swapped in their own.

Without the Murphy tax hikes, they have also tweaked revenue estimates to show higher collections from the corporate business tax. In doing so, they also suggested Murphy included revenue estimates that were artificially low to justify the need for higher taxes.

On Wednesday, Murphy sent a letter to Sweeney and Coughlin in which he warned of “corrective action,” hinting he may use his line-item veto to erase spending in the budget, according to several reports. He said in a public appearance his own budget is based on long-term, recurring revenues.

Sweeney fired a letter back suggesting if Murphy does that, the legislature could vote to override Murphy’s vetoes and put the spending right back in the budget.

The Democratic majority in the state Senate and Assembly have added hundreds of millions of dollars of budget items that were not included in Murphy’s plan for 2020.  They include offsets for the minimum wage increase, full funding for the Senior Freeze property tax relief program, doubling the income tax deduction for veterans, and an extra $50 million for New Jersey Transit.

Any of the above items could be the target of a line-item veto from the governor who says all options are on the table as his staff continues to review the legislature's spending plan.

Murphy continues to argue the state needs more money to pay for existing programs as well as the items added to the budget he proposed last March. His preferred method of generating that revenue is by raising the tax rate on those making above $1 million dollars. This is the same tactic Murphy used last year in the midst of tense negotiations with legislative leaders. However, an analysis shows the legislature has a better track record at predicting revenues than Murphy.

When lawmakers refused to give him a millionaires’ tax hike last year, Murphy warned in a press release their budget would end this fiscal year nearly $1 billion short. He claimed the spending plan he was forced to sign would plunge New Jersey deeper in debt with a $104 million dollar deficit and no surplus.

Numbers from the state treasurer and non-partisan Office of Legislative Services show New Jersey will actually close out the current fiscal year with a surplus of over $1 billion.  That leaves Murphy’s own projections almost $2 billion off target.  Sweeney and Coughlin say the governor is crying wolf (again).

Earlier this week, Murphy repeated much of what he said a year ago, when he warned the Coughlin/Sweeney budget could not cover the cost of key investments in school funding, mass transit, and property tax relief.

A senior legislative staffer who is familiar with the current budget process argued last year’s budget covered those costs, and then some, and its why “we are confident we are right again this year.”