The state’s left-leaning progressive groups and the more conservative-leaning business associations are staking out their positions on what they want, and don’t want, as part of the state’s budget for next year.
Gov. Phil Murphy will present his proposed spending plan at noon Aug. 25 at Rutgers University’s SHI Stadium in Piscataway, which will cover expenses between Oct. 1, 2020, and June 2021. According to Murphy, he will address “how we’ll make essential investments New Jersey needs to defeat COVID-19.”
According to treasury projections, the state is facing a $7.3 billion shortfall during those nine months, meaning the governor could end up signing a $33.8 billion budget at the end of September rather than the $41 billion spending plan he unveiled in February.
Meanwhile, treasury officials revised how much the state’s closing balance would be on Sept. 30, 2020, the last day of the extension, lowering predictions by $2.75 billion to $36.7 billion—rather than the $39.4 billion in the original spending plan.
In June 2019, Murphy signed a $38 billion budget to cover state expenses for the next year. A year later, the governor approved a “bare bones” $7.6 billion stop-gap extension of that budget, as the pandemic triggered mass business closures, steep drops in consumer spending and record-high unemployment. Over $1 billion in expenses was simply delayed until after Oct. 1, 2020.
His new spending plan will be backed by the administration’s authority to borrow up to $9.9 billion, without voter approval, to balance the budget after the state Supreme Court dismissed a Republican-led lawsuit to block the proposal.
The governor and legislative leadership – Assembly Speaker Craig Coughlin, D-19th District, and Senate President Stephen Sweeney, D-3rd District – have all assured that the state would only borrow as much as it needs. Indeed, the high court ruled that the state could only borrow to make up for revenue shortfalls certified by the state treasury, and not a penny more.
On Tuesday, a group of nearly 100 New Jersey college professors and economists wrote in a letter to Murphy and legislative leadership that tax increases on wealthy residents and large corporations would be a vital component of successful efforts to balance the budget.
“We realize that New Jersey must run a balanced budget. In a recession, balancing the budget by cutting vital spending has a more negative impact on our citizens than balancing the budget by raising taxes,” reads the Aug. 18 letter, which mostly includes professors from Rutgers University.
Increasing the income tax on earners about $250,000 would bring in an additional $1.5 billion in revenue, the letter contends. Meanwhile, extending the heightened 2.5 percent corporate business tax surcharge on businesses earning more than $1 million a year, could rake in another $425 million.
“Cutting spending on housing, public transportation, and health care removes spending from New Jersey’s economy when it is most needed and hurts the people who need it the most—those who have been disproportionately affected by COVID-19,” the letter continues.
But business groups – like the New Jersey Business & Industry Association – were quick to dismiss the proposals.
“There must be no new taxes in this plan, as they are completely inappropriate and unnecessary in the short-term with the potential infusion of $9.9 billion,” NJBIA President and Chief Executive Officer Michele Siekerka said in an Aug. 19 statement.
“The very businesses that would pay any new tax imposed by the state are the same ones that have been limited or closed for months under orders imposed by the state.”
The stances of both groups are nothing new—pro-business organizations have, during every budget cycle, opposed tax increases. Progressives argue that they are necessary to ensure social and economic equity across the state.
“New Jersey is facing an unprecedented economic crisis that is uniquely harming low-paid workers and their families,” Brandon McKoy, president of one such group, New Jersey Policy Perspective, said in a Tuesday statement.
“The economists’ letter makes it abundantly clear that budget cuts would make it impossible for the state to provide relief to the families and small businesses who need it most, while also taking money out of local economies across the state.”
Murphy has not indicated what, if any, tax increases he would pursue.
Over the past few months, he’s hinted that the state would need “revenue raisers” to balance the budget. His original plan called for a “millionaire’s tax” on income above $1 million, and an increased cigarette tax rate.
“Taxes need to be off the table,” Sweeney, an oft-times political opponent of the governor, responded in an interview. “I would say taxes are the last option.”