(Bloomberg) – New Jersey Gov. Phil Murphy has proposed a record $48.9 billion budget for fiscal year 2023, buoyed by pension, education and tax abatement spending.
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His plan is targeting a $6.8 billion contribution to the retirement fund, marking the second straight year he would make providing the minimum amount required by actuaries. This hasn’t happened since 1996, and as a result New Jersey’s unfunded pension liability is at least $74.9 billion, one of the highest among US states.
“We were told that we would definitely never meet our public service pension obligations,” Murphy said Tuesday in his budget speech to lawmakers. “Not only did we do it last year – marking the first time in a generation that our obligation was fully met – we are doing it again in this year’s budget.”
Murphy’s plan for the fiscal year that begins July 1 is 5.4% better than the plan he signed last June, and less than 1% better after adjusting for windfall revenue. Compared to the first budget he signed for the 2019 financial year, however, it is 31% higher. In comparison, budgets signed by Murphy’s Republican predecessor, Chris Christie, increased by 10.5% between 2011 and 2015.
Murphy, a 64-year-old Democrat and retired senior director of Goldman Sachs Group Inc., began his second term in January with a renewed commitment to fix state finances and make them more affordable. His budget speech comes less than a week after New Jersey got its first credit rating upgrade in 17 years.
“Obviously this is just an upgrade, but we’ll keep working to make this the first to come,” Murphy said.
As he pushes for record spending, Murphy also forecasts revenue growth of less than 1% as spending returns to pre-pandemic levels and deductions take hold for income accounts, retirement and college savings.
The plan does not include any new tax from Murphy, who was able to impose a surtax on millionaires through the Democratic-controlled Legislature in 2020. The budget also calls for a one-year waiver of wedding, driver’s license fees and occupational health and for resident admissions. to state parks, at a total cost of $60 million.
“This budget is rooted in a renewed commitment to moving our state forward, creating opportunity for every family, and making our state more affordable,” Murphy said. “In addition, this budget directly addresses the most persistent affordability challenge our state has faced in decades: property taxes.”
As promised last week, Murphy’s budget includes $900 million to fund rebates for tenants and landlords who bear the highest property taxes in the nation. About 1.2 million homeowners earning up to $250,000 a year will receive average benefits of $700 in fiscal year 2023, rising to $1,150 by 2025. About 633,000 renters will receive a maximum of $250.
After the speech, Republican lawmakers said Murphy was irresponsible with all the financial windfall, especially with the rebates.
“It really does nothing to fix the root cause” of the property tax growth, Assembly Minority Leader John DiMaio of Hackettstown said.
Sen. Declan O’Scanlon of Little Silver said it’s “wonderful that we have cash” but taxpayers need it now.
“People won’t see those checks until maybe the spring of next year,” said O’Scanlon, Senate Republican budget director. He called it “the multi-year delay” in returning taxpayers’ money.
The future of public transit
Murphy’s budget proposed a surplus of $4.2 billion, nearly double the current figure. It is seeking to spend $1.3 billion on debt repayment and using cash instead of new borrowing for certain projects.
New Jersey got a credit rating upgrade on March 2 — its first since 2005 and its first from Moody’s Investors Service since 1977. Moody’s noted steps taken by the Murphy administration to raise pension contributions and reduce debt. At the same time, he warned of ongoing challenges.
“Despite the state’s diverse economy and rich tax base, it retains pension benefit liabilities that are among the largest of the 50 states and will present recurring fiscal pressure and increase the vulnerability of the state to financial market downturns,” Moody’s said in its statement.
According to Murphy’s budget, New Jersey Transit would have no fare increases for a fifth straight year. The governor has pledged to transform the nation’s largest statewide mass transportation provider, a key link to jobs in New York, after years of budget cuts that left him with a degrading safety and reliability.
His budget proposal, however, continues some practices that Murphy criticized: he transfers $82 million from a clean energy account and transfers $362 million in capital funding to day-to-day operations. And while it gives NJ Transit $746 million from the Turnpike Authority, it doesn’t identify a dedicated revenue stream, as transportation advocates have wanted for years.
School aid, at $11.6 billion, accounts for nearly 25% of the plan. Debt service, excluding school construction, is budgeted at $3.3 billion, or 6.7% of expenditures. The pension payment is approximately 14%.
“With more help for our public schools and a full pension payment, this budget will continue to put downward pressure on property taxes,” Murphy said.
His total pension fund payments, including those for 2023, are $25.5 billion, more than the sum paid out by his six most recent predecessors, according to his office.
Still, New Jersey’s unfunded liability as of July 1, 2020 was $74.9 billion, 4% higher than a year ago. It had only 58% of the funds needed for about 800,000 current and future retirees.
A new budget initiative by Murphy, the Evergreen Innovation Fund within the state’s Economic Development Authority, would dedicate $300 million to entrepreneurship and venture capital.
The plam also counts on revenues of $19 million in the first year of recreational marijuana sales.
Murphy delivered his budget speech in person for the first time since the pandemic hit New Jersey in 2020. More than 30,000 New Jerseyans have died from Covid-19.
“It has been, without a doubt, two long and difficult years,” he said. “Today we are back in this Assembly. But more importantly, New Jersey is getting back to normal. »
(Updates with Republican response to budget address)
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