A Look at the Nine-Month State Budget Proposed By Governor Murphy
Governor Murphy presented a nine-month budget on August 25, 2020, for the abbreviated State Fiscal Year starting October 1, 2020. Relying on a mix of borrowing, tax increase, and budget cuts, the Governor’s proposal for the nine-month fiscal year proposes $32.4 billion in spending, with a proposed budget surplus of $2.2 billion. Coupled with the temporary three-month budget effective July 1 to September 30, 2020, total spending over the twelve-month period would total slightly more than $40 billion.
The Governor’s Budget Proposal estimates that roughly $6.2 billion of funding is required to offset anticipated lost revenues from COVID-19. To make up for that shortfall, the Governor is proposing to borrow $4.0 billion as authorized by the “COVID-19 Emergency Bond Act.” The New Jersey Supreme Court recently upheld the Act as constitutionally permissible under the Emergency Exception of the Debt Limitation Clause. An additional $1.0 billion in tax increases and $1.2 billion in programmatic cuts are also proposed. The two main tax increases proposed include a tax of 10.75 percent on income over $1.0 million and an extension of the Corporate Business Tax surcharge of 2.5 percent.
The Budget Proposal does maintain some programmatic spending at levels equal to that of the prior fiscal year and proposes new spending. For example, there are no cuts to K-12 education or municipal aid, and the State will make its planned pension payment. The Budget Proposal also provides the full spending plan for $2.39 billion of federal funding received through the Coronavirus Relief Fund allocation. Lastly, the Governor proposes to launch a statewide “Baby Bonds” initiative, which will provide a $1,000 deposit for the babies born in 2021 into families whose income is less than 500 percent of the Federal Poverty Level ($131,000 for a family of four).
A summary of the Governor’s budget announcement can be found here. The nine-month spending plan must be enacted by September 30, 2020, leaving lawmakers a little over one month to finalize the budget. This is much shorter than the typical budget review process, which normally takes place over several months.