When the pandemic hit in March of 2020, it was widely expected to devastate the New Jersey economy. Unemployment soared, and Governor Murphy warned the state was facing fiscal purgatory. Governor Murphy’s administration projected a $4.3 billion budget deficit. The Governor and Legislative Leadership agreed that significant borrowing would be necessary and bonded for approximately $3.7 billion.
The economic devastation did not play out as New Jersey government anticipated. The state is on track to collect $5.2 billion more in tax revenues in the current and upcoming fiscal years than expected just three months ago. The bulk of the surging tax revenue lands in the current fiscal year, which ends June 30. There’s a $4.1 billion anticipated boost in this fiscal year followed by a $1.1 billion uptick in the next, as the state bounces back from the coronavirus pandemic. In the Treasury Department’s latest projections, it showed revenues for this fiscal year being $7.3 billion higher than anticipated when Murphy signed the budget in the fall. The state is ending this fiscal year with a $10.1 billion surplus, though much of that will be spent down in the fiscal year beginning July 1. The state is projected to still have $6.9 billion in reserves by the end of next year — an increase of $4.74 billion.
According to the State Treasurer, the cause for the higher-than-expected revenues stems from federal stimulus checks in December and March, and a soaring stock market. The State Treasurer has also touted that gross income, sales and corporate taxes are all expected to hit “historic highs” in her report to the state Assembly Budget Committee.
Key Components of the Budget
· $46.4 billion budget.
· An even larger contribution to NJ’s notoriously underfunded pension system than even originally proposed: In February Governor Murphy requested a $6.4 billion payment, which would be the state’s first full pension payment in a quarter century. This contribution number was boosted by an additional $505 million from February.
· Prioritizes how the state will pay down its debts: Most of NJ’s outstanding debt is not callable, meaning they are unable to be paid off early; A13 “New Jersey Debt Defeasance and Prevention Fund,” appropriates $3.7 billion from the General Fund to the “New Jersey Debt Defeasance and Prevention Fund” – $2.5 billion for the purpose of retiring and defeasing State debt; $1.2 billion for the purpose of funding certain capital construction projects.
Finally, the NJBMDA Members should be aware that as of Thursday, July 1, higher rates for the state’s Unemployment Insurance Fund will go into effect since the Governor & Legislature did not address the issue in the budget. The Governor does not need legislation to fix the issue and can offset the cost with budget surplus funds but has not chosen to do so at this time. As you may recall, late last year, the Legislature passed and the Governor signed legislation, A-4853, that spread the massive increase out over the next three (3) fiscal years with July 1st being the increase dates. Since everyone believes this is a tax free budget, which it technically is since the UI Fund Increase is not directly related to the budget but due to the COVID-19 Pandemic and the huge unemployment in the state that was a direct result.