Gov. Phil Murphy issued his clearest veto threat of this budget season to date on Wednesday.
“So, to be clear, if this budget contains the revenue for your added spending, I will work with you. But if not, I will be forced to take corrective action,” Murphy said in a letter to lawmakers obtained by the New Jersey Globe.
The budget making its way through the legislature — lawmakers are scheduled to vote on it during sessions in both chambers Thursday — cuts all but one tax increase sought by Murphy in his budget.
That hike, a slight bump in the tax on HMO premiums from 2% to 3%, isn’t enough to fully cover increased spending under the legislative budget.
To make up for the short fall, legislative leaders are dipping into the state’s Rainy Day Fund, shifting a $317 million deposit into the fund — the first in over a decade — away to fund other programs.
“These revenue assumptions, along with spending down every cent of our Rainy Day Fund, will leave our state’s fiscal house on continued shaky footing, leaving every New Jersey resident vulnerable to an economic downturn,” Murphy said in the letter. “This is the type of budgeting that led to eleven credit downgrades in the previous administration, and continuing it would put us at risk of more.”
Until now, Murphy had been relatively coy about the action he would take once the legislative budget reached his desk, saying repeatedly that “every option was on the table.”
It’s not clear exactly what action Murphy intends to take if the $38.7 billion budget reaches his desk.
Murphy has the option to line-item veto portions of the budget. That gives him the ability to remove spending for specific items he objects to.
However, a line-item veto does not allow him to insert a tax on millionaire’s, a measure long sought by Murphy’s administration, into the budget.
Legislative leaders have indicated their resistance to a tax on high earners since the end of last budget season.
Democratic lawmakers passed a millionaire’s tax five times under former Gov. Chris Christie, but have since shifted their position, saying that the cap imposed on state and local tax deductions last year by Republican lawmakers at the national level makes the proposal unworkable.
“Tax fairness is an issue that will not go away on June 30,” Murphy said in the letter, echoing statements he made Tuesday. “The people of New Jersey elected me because they had been poorly served by the business-as-usual, special interest politics of Trenton. I continue to put them first every day as I have always done and as I always intend to do. The time is now to show nine million New Jerseyans that you stand with them, and that you’re ready to take on the hard work of changing Trenton.”
It also cuts other taxes sought by Murphy, including a hike on gun license fees and a tax on opioid manufacturers, among other levies.
Murphy’s letter further takes issue with some of the revenue projections included in the legislative budget.
Mainly, that budget includes optimistic projections about revenues from the state’s corporate business tax that Murphy says do not align with the numbers drafted by his administration or the Office of Legislative Services.
“For the most part, our revenue assumptions aligned with those of OLS, but this budget proposes numbers which diverge from both OLS’s and the administration’s projections,” Murphy said.
The governor did praise portions of the budget — mainly those on the spending side — and his tone still fell short of the combative one he adopted during last year’s negotiations.
On spending, the legislative budget and the one Murphy proposed in March are fairly similar, though the former cuts the level of funding provided for Murphy’s tuition-free community college program.
A little more than 11 days remain until the state’s budget deadline.
Lawmakers in the statehouse and those in 225 West State Street have so far been optimistic on avoiding a shutdown, but time is ticking down.
If Murphy and legislative leaders fail to reach an agreement by then, the state will shutter its parks and beaches in addition to many of its departments employing thousands of public workers.
“I am confident we share a common goal of moving New Jersey forward and making this a stronger and fairer state that works for every family,” Murphy said. “In that spirit, I look forward to working together to achieve that worthy objective.”Gov Murphy Ltr to Members of 218th Legislature 6.19.19