Governor Murphy Proposes the Fiscal Year 2021 Budget
Governor Phil Murphy presented the outline of his spending plan for Fiscal Year (FY) 2021 to the State Legislature on February 25, 2020. The FY 2021 Budget proposes total revenues exceeding $42.7 billion (a 4.3 percent increase from FY 2020), and $40.8 billion in total appropriations (a 2.2 percent increase from FY 2020). An additional $1.6 billion is dedicated for surplus and $300 million is directed into the State’s “rainy day” fund. If enacted as proposed, this would be the largest budget in New Jersey history.
One of the biggest expenses is the annual payment to the State’s pension system; a proposed total of $4.9 billion for FY 2021. If funded at this level by the Legislature, the contribution to state pension system would consume 12 percent of all state appropriations. This contribution is still only about 80 percent of what is actuarially required.
Additional priorities for the Governor include increases to the state education funding formula by $336 million; another $132 million for NJ Transit; creating the Garden State Guarantee to provide two years of tuition free higher education; funding for lead service line replacements; and expanding eligibility for the Earned Income Tax Credit Program and the Pharmaceutical Assistance for the Aged and Disabled and Senior Gold programs.
The Governor proposes to pay for these increases in spending with several tax increases and other measures. For the third year in a row, the Governor has proposed extending the 10.75 percent income tax rate on income over $1 million, which would raise $493.8 million. A proposed tax increase on cigarettes to $4.35 per pack would raise an additional $218.5 million. Lastly, and for the second consecutive year, the Governor is seeking a “corporate responsibility fee” for private employers that have more than 50 employees or their dependents receiving state Medicaid benefits. The fee ranges from $325 to $725 per employee, depending upon the number of employees and their dependents on Medicaid, and is proposed to yield $180.5 million.
The Governor’s cost saving measures include $400 million in departmental savings. Additional healthcare cost savings and improved auditing and enforcement measures are also expected to result in additional savings and new revenue.
As the Governor stated in his remarks, the budget he signs into law on or before June 30, 2020 “won’t look exactly like the one” he proposed. The Legislature will begin its review of the Governor’s budget proposal in March, receiving public comment and holding individual hearings focused on each department and independent authority.