NJ state budget: This is why Democrats ‘do not want drama’

With an address outlining his proposed budget for New Jersey’s fiscal year 2024, Gov. Phil Murphy has handed off the baton to the Legislature, which will now consider his various proposals on revenue and spending.

The Legislature, in turn, will deliver a revised budget to Murphy’s desk for final approval before the end of June.

In his address, an annual Trenton custom, Murphy touted his plans to move the Garden State forward from the aftermath of the COVID-19 pandemic, describing what he call the “Next New Jersey” as a more affordable place to live and work.

What the governor proposed: Murphy proposed a sweeping set of proposals aimed at lowering taxes. He also sought to update New Jersey’s “antiquated” liquor license system and promised no new taxes. He highlighted reforms to the NJ Transit system and the efforts he’s made to ease the burden on local governments through state aid to municipalities and New Jersey’s public schools.

What’s at stake: In a year when all 120 seats in the Legislature will be up for grabs in the November election, observers can be sure that Murphy’s proposal and the final budget he’ll likely sign at the end of June will not be the same.

What experts predict

The governor’s office has the staffing and resources to create a budget, which he proposes and then the Legislature can use as a template, said Dan Cassino, a professor of government and politics at Fairleigh Dickinson University.

Because both the Assembly and state Senate are also controlled by Democrats, much of what Murphy proposed last week will likely survive in some form in the budget, Cassino said.

He noted that because Murphy “gets along pretty well with the heads of the state Legislature” — Assembly Speaker Craig Coughlin and Senate President Nicholas Scutari, both Democrats — they have “already kind of vetted” his budget proposal.

Now Coughlin and Scutari must focus on building consensus around Murphy’s various proposals — and then, they must deliver results in the form of votes.

Regina Egea, president of Garden State Initiative and a former chief of staff for Gov. Chris Christie, predicted a fairly smooth path for the 2024 revenue and spending plan.

Egea said that because this is an election year and lawmakers are sitting on a hefty surplus — more than $10 billion in Murphy’s proposed budget — there won’t be a “lot of the negotiating going back and forth that you see in other years.”

Cassino echoed that sentiment and said that although Murphy’s proposal included things that “would be controversial if it were not an election year,” Democrats “do not want drama.”

“Nobody’s canceling any vacation plans for July would be my guess,” Egea said, “because I don’t see this as contentious at all.”

2024 NJ budget:These are Phil Murphy’s top fiscal priorities

Here’s a look at how some of Murphy’s highest priorities may make their way through legislative review:

New taxes

This budget includes $200 million in municipal relief for health benefit costs for public employees, a proposal that comes in direct response to the more than 20% increase municipalities that participate in the State Health Benefits Plan saw in 2023.

That $200 million can be used to offset the costs, but with the current health care market, there’s no guarantee it’s enough.

Similarly, school funding has an impact on tax payments. This budget includes the sixth year of a seven-year phased plan to fully fund schools in New Jersey. But that plan includes yearly changes in just how much aid each district gets; districts must work to sustain funding by upholding a variety of standards.

Liquor license reform

Murphy seems intent on bringing his version of reform to life and has the support of lawmakers from District 37, Sen. Gordon Johnson and Assemblywoman Ellen Park, because they introduced the legislation in both chambers. But that doesn’t mean it’s a sure thing.

Notably, statements released after Murphy’s budget address by key Democratic legislators — including Scutari, Senate Budget Committee Chair Paul Sarlo, and Senate Majority Leader Teresa Ruiz — did not mention the governor’s efforts to modernize the liquor license system.

The bill has been met with a mixed response from business owners across the state.

A related bill, already introduced in the Legislature by Sen. Troy Singleton, would address the issue by bringing so-called pocket licenses back into circulation.

There are an estimated 1,400 of these inactive licenses “sitting out there right now,” Singleton said last month.

His bill would allow towns to publicly sell licenses that haven’t been used for two years to the highest-bidding municipality. It would also require that buyer to issue the license in connection with an economic redevelopment plan.

Sarlo has previously voiced support for this bill and is a co-sponsor.

Cassino said there’s going to be “a lot of resistance” for Murphy to overcome.

“It seems unlikely at this point that that’s going to make a lot of headway,” he said. “I think the governor may have underestimated what a big lift that is going to be, because there are entrenched actors — restaurants — who spent up to $2 million on a liquor license who don’t want to see this happen.”

Egea also expects this to be changed, because not everyone was “involved in the conversation,” but said that overall it’s a minor part of the process.

NJ Transit

Murphy is not increasing fares on NJ Transit for the sixth year in a row, and that hasn’t happened in decades. The last time New Jersey governors went more than six years without a fare hike started in July 1990, when fares spiked on average 9%, and they didn’t go up again until nearly 12 years later, in April 2002, when they increased on average 10%.

In his budget address, Murphy also said the state is going to cut transfers from NJ Transit’s capital program to its operating program to a 21-year low. The reduction is only $28 million less than the $362 million that will be transferred this fiscal year. The first time the agency transferred money from capital to operating was $9 million in 1990. It’s ballooned to hundreds of millions over 33 years, bilking the agency out of billions for its capital fund during that time.

Cassino said there may be some pressure to create “some kind of revenue stream for NJ Transit, because the Legislature wants to get that done because it’s important to a lot of voters.”

“The governor has promised repeatedly to fix NJ Transit, and the big thing that fixed NJ Transit was just COVID driving a lot of people off NJ Transit so it wasn’t as big of a problem, but we still haven’t fixed the funding issue,” he said. “The governor promised he would give a permanent funding solution for NJ Transit, and he just hasn’t been able to do it.”

Tax relief

Tax relief programs seem poised to make the final draft, but will they prove to be enough?

The budget plan the governor presented would double the child tax credit, renew the ANCHOR program and increase eligibility for the Senior Freeze tax relief program.

The deadline for the first year of ANCHOR passed last month. Of the 2 million residents eligible, almost 1.7 million applied for relief.

Cassino said that because of the “unprecedently high budget surplus,” there might be pressure to increase the payouts for programs like ANCHOR.

“There is going to be some pressure on the governor to spend a little more of the surplus and send it back to voters, because that is going to make voters happy,” he said. “There is going to be some pressure to perhaps increase the amount of money put forward toward the ANCHOR property tax rebate.”

But Egea doesn’t think that is enough and is of the opinion that “we are not making New Jersey more affordable by giving rebates.”

“That is really just moving money from one pocket to another,” she said. “The cost of living continues to be the same if not higher in the state.”

Egea also noted that businesses will see an increase in unemployment insurance costs and drivers will be affected with toll increases, before going on to say that even the reduction to the Corporate Business Tax by letting the surcharge sunset is “not going to be sufficient to make us competitive, which is really the premise.”

Cassino said that letting that sunset would be controversial in a non-election year and “might prove to be controversial this year” because it’s “going to be hard for progressive Democrats to vote for that.”

Staff Writer Colleen Wilson contributed to this story.