In less than two weeks, Gov. Mikie Sherrill will unveil the proposal for her inaugural budget, but before then, she’s sounding the alarm.
In a press conference on Thursday afternoon, Sherrill and Treasurer Aaron Binder said the state faces a “serious” structural deficit — the state spends $3 billion more than it takes in — that could threaten to deplete the state’s reserves in just two fiscal years. Sherrill offered few details on how she plans to address the budget deficit — she deferred to her March 10th budget address — but promised to focus on cutting spending as opposed to raising taxes on New Jerseyans.
“We are going to look for savings, because together, we need to fix Trenton’s historic spending problem,” Sherrill said. “And I’m going to stay laser-focused on investing in three things that voters sent me here to do: to lower costs for working families, to protect our kids, and to make our government more transparent and accountable.”
Binder said the state’s finances have been “detrimentally impacted” by decades of poor decisions from New Jersey’s leaders. He pointed to, for example, years of pushing off full pension payments. Had those pension payments been consistently covered over the years, it would cost a little more than $1 billion per year. But Gov. Phil Murphy, the governor who finally returned the state to full payments, had to dedicate more than $7 billion of his budget to pensions, more than 10% of the state’s total expenditures.
Binder said the state expects to enter the next fiscal year with a $7.2 billion surplus. If current spending and trends continue, the governor’s office estimates that the state’s surplus would drop to $4.1 billion after the next fiscal year, and then dip to a $750 million deficit the year after that. (The state’s Constitution requires a balanced budget, making such a deficit unworkable.)
Sherrill declined to comment on the specifics of what spending she would push to cut, whether it be the senior property-tax relief program Stay NJ, the school funding formula, or the pension system. Her press conference instead served as the first act of what is expected to be a difficult budget season as Stay NJ costs rise and pandemic-era federal funding disappears. That COVID funding, Sherrill said, allowed the drafters of the last six budgets to “paper over some very real fiscal problems.”
“Let’s face it: For decades, previous administrations have allowed for business as usual in Trenton and failed to solve things long-term,” she said. “We’ve seen too many one-offs, too many temporary fixes.”
The governor also pushed her intention to improve transparency surrounding the state budget, including announcing an April pilot program that will allow the public to track state spending.
“Ultimately, the best way to demonstrate our commitment to transparency is to hold ourselves accountable in the actual budget, making sure it’s clear, direct, and doesn’t paper over problems,” Sherrill said.
State Sen. Declan O’Scanlon (R-Little Silver), the Senate GOP’s budget officer, said in a statement that he agreed with her that “Trenton Democrats have been papering over a cratering budget mess, and tax increases aren’t the answer.” O’Scanlon said he hopes to work with the Sherrill administration and Democratic legislators to find spending cuts.
“Republican members of the Senate Budget Committee sent her a letter two weeks ago urging her to embrace all the Republican reforms and restraints that were ignored by Democrats for years,” O’Scanlon said. “Her first big test will be her March 10th budget address, and if she delivers on a promise to finally stand against tax and spend Democrats to help people who pay too much for government largesse, we are prepared to help.”
Murphy, Sherrill’s predecessor, touted a series of nine credit upgrades in the second half of his tenure, pointing to them as evidence of a fiscally strong state. When asked if she was worried downgrades could be on the way, the governor said that something would have to be changed to avoid them.
“We’ll definitely have credit downgrades if this is our plan,” Sherrill said, pointing to a chart showing a plummeting surplus. “What we are fighting for is to continue to run the state in a fiscally responsible way.”
This article was updated at 3:27 p.m. with comment from O’Scanlon.