When a gut check became a number check: How legislative leaders felt they won the battle

By Anjalee Khemlani
Trenton | Jul 6, 2018 at 1:55 pm

It was last Friday — otherwise known as the middle of the contentious budget battle between Gov. Phil Murphy and the Legislature.

At an afternoon news conference, Murphy let everyone know just what he thought of the Legislature’s numbers in its proposed budget.

They were wrong, Murphy said. In fact, they were $855 million off the projections his team made with the same data.

Worse, he said, they weren’t even based in reality. Instead, Murphy said they were a result of the way Trenton always has done the numbers — and he wasn’t going to stand for it anymore.

“I’m not here … for symbolism,” Murphy said. “I’m here to restore fiscal common sense to this state.”

The words stunned members of the Legislature.

Could Murphy be right and they be wrong?

Two sources familiar with the Legislature’s thinking — because they were working on that side of the fight — told ROI-NJ the Legislature was concerned. Both requested anonymity because they are not authorized to speak publicly on the issue.

But they provided a recap of what transpired last weekend.

“(The legislative staff) got a little skittish: How could this possibly happen?” one legislative insider said.

The source said the legislators became concerned about their own numbers — especially since there was no April Surprise in tax collections to boost revenues for the end of fiscal year 2018.

Another insider told ROI-NJ the Legislature had, for the current proposal, used the highest of the range that the Office of Legislative Services provided, which is why the governor was concerned.

This is where the perceived attack on OLS came from. And it caused the Legislature to take a harder look.

So, after the attacks from Murphy, it recalculated the numbers.

“We did an analysis not only of our numbers, but also an analysis for all the numbers the administration gave us,” the person said.

In the end, both sources said legislative leaders came to the conclusion their numbers were better than the governor’s.

Revenue estimates left blank at the time of budget signing over the weekend were finally filled in earlier this week, and one thing became clear: The numbers are closer to the Legislature’s estimates than the governor’s.

In fact, some are higher than the legislators’ original prediction.

Here’s a look at just some of the numbers:

  • Online sales tax: The legislators made an original projection of $176 million. The governor countered by saying the revenues would only be $110 million The final budget books them for $188 million.
  • Medicaid drug manufacturers rebate: The legislators originally projected $29.6 million. The governor refused to score it. The final budget passed with $29 million.
  • Tax amnesty: Originally, both the governor and the Legislature scored this at $150 million. In the final budget, the number rose to $200 million.

The sources said recalculating the numbers gave the legislative leaders more confidence in the negotiations that led to last Sunday’s voting session.

Ultimately, the sides agreed to a bill package to temporarily increase the corporate business tax, increase the tax on $5 million-plus earners, allow for a tax amnesty, maintain the 6.625 percent sales tax, account for Medicaid drug manufacturer rebates, include PBM savings, create an audit of the state’s health benefits and account for an online sales tax beginning Oct. 1.

Of those things, the enactment of the online sales tax and the benefits audit had been what Murphy had criticized repeatedly as being one-shots and unknowns.

The use of these items, which the Legislature had been pushing all along, was certainly noted.

“This is our ‘fake budget’ that we had,” one source said.

Read more from ROI-NJ:

Anjalee Khemlani | akhemlani@roi-nj.com | AnjKhem