NJ Budget Process Continues
Initially in February, Governor Murphy’s predicted state revenue for fiscal year 2024 was just over $54 billion. This would have allowed the State to carry over roughly $10 billion for future projects or pension payments. However, as the budget process has continued a series of events has impacted the budget process negatively.
First, tax revenues from income and business taxes have been well below forecast. After an unprecedented two-year surge in State tax revenue, New Jersey’s funding train is coming to an end. The New Jersey Treasury Department says it now expects to collect $1.2 billion less for the fiscal year that ends June 30 than it estimated in February, and its forecast for the next fiscal year is now $1 billion lower than original estimates.
This recent revenue update also comes as the Murphy administration pushes changes to New Jersey’s corporate tax code, changes that experts say will amount to significant tax breaks for the largest companies doing business in the state. The Administration has already committed to ending a 2.5% surtax on corporate profits above $1 million (the Corporate Business Tax or CBT), a move that is expected to cost New Jersey about $1 billion in annual revenue.
Now some legislators and Senate President Scutari are pushing for the CBT to remain in place and be used to decrease property taxes and help address municipal funding shortfalls. On the Assembly side, Speaker Coughlin is proposing a 50% property tax rebate for seniors that would equate to a $1.6 billion price tag once fully funded.
The updated revenue projections will not force state leaders to make budget cuts this year thanks to a record surplus of more than $7 billion, as well as an additional $2.5 billion that is currently set aside to pay down debt and avoid new borrowing. Nonetheless, over the past two years state spending has increased by more than $18 billion, or about 53%, since the Democratic Governor took office.
And, as this budget process plays out, in Washington DC President Biden and House Speaker Kevin McCarthy are in negotiations to end a standoff over the U.S. government’s debt limit. In the proposed compromise, New Jersey would be required to refund roughly $1 billion of federal Covid relief funds that have gone unspent to date.
All of this leads to a very busy three weeks remaining in the budget session. With all 120 members up for re-election, it is expected they will find a compromise and prevent any threat of a shutdown. After which, the legislative members are expected to recess in July and will return after the November elections.