Gov. Phil Murphy signed Democrats’ $46.4 billion budget bill into law a day ahead of the deadline Monday, capping an election year appropriations process that lacked the Democratic infighting that defined budget negotiations in the first two years of his term.
“New Jersey is now standing before the dawn of the new post-COVID day that is breaking, and this is the budget that will see to it that this day is better than yesterday,” Murphy said. “There is so much good that this budget invests in that talking about everything would take me past the state’s constitutional deadline of tomorrow.”
The voluminous bill, one fueled by better-than-expected collections and federal aid that left the state with a $10 billion surplus at the end of the current fiscal year, features a $6.9 billion pension payment and a $3.7 billion debt defeasance fund to pay down existing obligations and prevent future borrowing.
Murphy initially proposed a $6.4 billion pension payment, but lawmakers agreed to boost that by $505 million after the swell in revenues. The governor has said the larger payment would save the state more than a billion in future pension obligations.
“The pension system, if we hadn’t started funding it, would’ve gone bankrupt,” Senate President Steve Sweeney (D-West Deptford) said. “Now, we’re moving in the right direction, and it is an investment. It’s not pork. That’s an investment in people. We’re fixing higher education. We’re raising the floor instead of raiding one school to another.”
Democrats eschewed tax hikes in the new budget bill, though they did little to head of an increase to the payroll unemployment tax that will go into effect next month. Those collections are meant to replenish the Unemployment Insurance Fund, which saw its coffers drained by record-high claims made during the pandemic.
But the bill did include tax breaks that might win voters’ hearts before the November election. The state will devote $319 million to a tax rebate program that’ll see New Jerseyans with dependents receive checks worth up to $500, though most awards won’t be that high.
They’ve also updated the Homestead Benefit Program, which provides tax rebates to New Jersey homeowners. That program was updated to calculated rebates using property tax bills from 2017 instead of 15-year-old bills from 2006.
The debt defeasance fund includes $2.5 billion to pay down existing debt. Democratic staff has said they’ve identified $3.2 billion in debt that can be paid down early. The $1.2 billion remaining in the fund is to be used for capital investments. Democrats have pushed it as part of the larger debt defeasance package, arguing it can be used to prevent future borrowing.
The windfall also left the state with far more in reserves than was expected earlier in the year. Murphy’s budget proposal called for the balance of the state’s rainy-day fund to be drained to zero. Instead, it’ll have a $1.3 billion balance. Another roughly $500 million is being deposited into the unrestricted surplus.
But the lack of infighting doesn’t mean the process was drama free.
Democrats faced widespread criticism for an incredibly opaque budget process. The full text of the budget bill became publicly available just minutes before budget committees in both chambers advanced the 280-page measure.
Budget resolutions showing which lawmakers requested so-called “Christmas Tree” items were not released ahead of the vote, conflicting with the intent of a 2007 reform to avoid corruption that required such resolutions be made public 14 days before the final budget vote.
The Senate has released a list of line items that includes a single sponsor for each item, but that document does not show legislators confirming their budget resolutions did not represent conflicts of interest. The resolutions themselves have yet to be released.
The list of pet projects is long and totals more than a hundred million. Senate Republicans called on Murphy to release whatever budget resolutions he had in his possession Tuesday morning.
They include, among numerous others, $3 million for camp repairs and redevelopment in Irvington, $10 million for property acquisition by the North Bergen School District and $15 million for the Camden County Improvement Authority to demolish vacant properties.
The Assembly has yet to release those documents, though Assembly Speaker Craig Coughlin (D-Woodbridge) and Assembly Budget Committee Chairwoman Eliana Pintor Marin (D-Newark) have said they would make them available to the public in the coming weeks.
Unsurprisingly, Republicans opposed Democrats’ budget, claiming Murphy and legislative leaders should have used the $10 billion surplus to send money back to tax payers and head off the increase to the unemployment tax.
Democrats are saving some of that money, which includes roughly $4 billion in better-than-expected collections and more than $6 billion in federal funds made available under the stimulus bill President Joe Biden signed into law in March.
But some of that money is being used, and much of it is going to legislators’ pet projects.
There’s $200 million for an extra year of special education for the next three years. Special education is an issue close to Sweeney’s heart. The Senate president’s daughter is a young woman with a developmental disability.
Millions more are going to a series of programs to reduce food insecurity, a key issue for Coughlin.
“When I look at the budget, I don’t see, really, a lot of line items. I see life-changing impacts from investments in communities and in their future,” the speaker said. “We put money back in people’s pockets.”
Another $750 million in federal funds is going to end the state’s eviction moratorium. Most of that money, $500 million, will be used for rental assistance, while the remaining $250 million will help residents pay their utility bills.
But while the governor and legislative leaders have reversed many of the irresponsibly budgeting practices common to New Jersey over much of the last decade, they again failed to identify a dedicated source of funding for NJ Transit, at one point drawing a rebuke from Senate Majority Leader Loretta Weinberg (D-Teaneck).
Though this year’s capital-to-operating transfer is roughly $100 million lower than it was last year, that reduction is fueled largely by federal aid that will evaporate in future years. Nearly $361 million is still being transferred, and the raid on the Clean Energy continues.