New Jersey’s legislature approved a $32.7 billion budget that borrows almost 14% of the total, raises millionaires’ income taxes and cuts the proposed pension payment. Governor Phil Murphy, whose fellow Democrats control the Assembly and Senate, has said he will sign it.
The spending plan, for the 2021 fiscal year that starts on Oct. 1, covers a nine-month cycle. New Jersey had added three months to the current fiscal year to help navigate uncertainty about its revenue amid a pandemic that in six months has killed more than 16,000 people in the state.
The budget relies on $4.5 billion in borrowing, an amount subject to final approval by a four-member panel of lawmakers.
Murphy, less than 18 months from his first term’s end, scored a political victory with an increase in the tax rate, to 10.75% from 8.97%, on those with incomes above $1 million. Lawmakers had denied him a millionaire’s tax in two prior budget years, but this time conceded that it was necessary to boost revenue reduced by the pandemic’s shutdown.
The administration has reported that 16,491 state residents and 19,128 who live elsewhere will pay the higher rate, which matches that already paid by 7,706 filers with incomes exceeding $5 million. The $400 million expected from millionaires in fiscal 2021 promised to fund payments of as much as $500 to 800,000 lower- and middle-class families in the following fiscal year, as Murphy and lawmakers are running for re-election.
The budget counts on $210 million from a 2.5% surtax on corporations with income exceeding $1 million and $102.7 million from an assessment tied to health-maintenance organization premiums. But it doesn’t include other Murphy tax increases, including $143.1 million from cigarettes $26.3 million from limousine services, boat sales and firearms and ammunition purchases.
At a Wednesday news conference in Trenton, Murphy said he was proud of what he called a negotiated spending plan. He said he looked forward to “signing this new budget into effect.”
Murphy had committed to a $4.9 billion pension payment, 80% of the actuarial requirement, amid fiscal stress caused by former governors’ skipping or skimping on contributions. The state under Murphy’s Republican predecessor, Chris Christie, was handed 11 downgrades by the three major credit-rating companies, which cited the underfunded pension among New Jersey’s weaknesses.
Murphy has made the pension payments a priority, but lawmakers cut his pledge by $200 million. They boosted the projected surplus 14% above his target, to $2.5 billion, as a cushion against the novel coronavirus’ potential second wave.
The budget includes $4.5 billion in borrowing. The total, 13% higher than Murphy had planned, will help to fund about $24 million in projects in lawmakers’ districts, including a Paterson neighborhood restoration and a Camden County demolition plan.
This article was provided by Bloomberg News.
