About 20 minutes into his budget address — after he heartfully thanked those in attendance for the well-wishes he received following his weekend announcement that he likely has cancer, and following his standard stump speech of how New Jersey can be both progressive and pro-growth — Gov. Phil Murphy addressed the biggest issue in the state, and his biggest dream: Funding the pension and increasing the millionaire’s tax.
And he did it with some numbers that are hard to argue.
After announcing his budget for Fiscal 2021 includes an additional $794 million increase in pension funding, he announced that the state will make an extra $279 million payment into the pension system this current fiscal year.
“This is a roughly $1.1 billion increase in our overall pension payment,” he told the Legislature. “This administration will have put more back into the system in just three years than the preceding one did in eight.”
Then came the call.
“We can keep this progress going, but only with recurring and sustainable revenues,” he said. “And there is no better alternative than a millionaire’s tax. It’s the way we both ensure tax fairness for our middle class and fairness to the dedicated rank-and-file women and men of our public workforce.
“After all, the millionaire’s tax is a matter of fairness to our middle-class homeowners and renters, our seniors and the countless working families reaching to pull themselves up and into the middle class.”
Murphy railed against the current property tax system.
“The property tax is the most unfair, regressive and cruelest of taxes,” he said. “A middle-class family in Merchantville or Milford or Moonachie, after all, pays a greater percentage of their income in property taxes than a millionaire anywhere else.
“It’s easy to see how our middle class can feel cheated. Their tax burden is real and, when put side-by-side with that of the wealthiest in our state, proves to be the exact opposite of fair.
“It isn’t the wealthy who bear the burden of our tax system — it’s the middle class.”
Then came the ask.
“Asking the wealthiest 22,000 New Jerseyans to pay two cents more, in income tax, for every dollar they make over $1 million, so we can provide nearly $500 million more in property tax relief to New Jersey’s families is simple fairness,” he said.
Murphy has pushed for an increased millionaire’s tax since the campaign trail. And he continued to push his narrative that increasing the taxes on the wealthiest will not drive them out of the state.
“There is not one iota of hard economic evidence that has proven the myth of millionaire tax flight, and, yet, I have heard from countless middle-class families and seniors, who are afraid that they may have to leave because of high property taxes.
“They should be our focus in making New Jersey more affordable and tackling income inequality. We go nowhere without our middle class, and, right now, they’re the ones getting squeezed.
“Let’s be clear — a millionaire’s tax doesn’t punish the rich; it lifts up the middle class and that’s good for everybody.
“So, I thank the Senate President (Steve Sweeney) and welcome his willingness to embrace a millionaire’s tax in this budget. When we have tax fairness, we can continue our historic investments in our pension systems and in our middle-class families.”
Murphy’s budget speech included the following items on his wish list, as provided by his administration:
- Building the surplus: The proposed budget includes another deposit into the Surplus Revenue Fund, or rainy-day fund, which represents the first time in two decades that deposits have been made in consecutive years. The budget’s total projected surplus, including the rainy-day fund, is a $1.6 billion, or 4% of total appropriations. This is a steady increase from the governor’s prior proposed budgets and triple the surplus of former Gov. Chris Christie’s last proposed budget.
- Pursuing savings opportunities: This budget includes nearly $400 million in departmental savings and approximately $174 million in proposed health benefits savings. Murphy also will establish a Grants Management Office to identify federal funding opportunities for the state and local governments.
- Reducing one-shot revenues: The proposed budget reduces nonrecurring resources to 0.8% of the budget, bringing one-shots below 1% for the first time on record. After reducing over $100 million in diversions last year, Murphy is proposing further reductions to the Clean Energy Fund diversion and restoring some 911 System and Emergency Response Fee revenues to support telecommunications upgrades.
- Stabilizing property taxes: Murphy’s budget supports over $1.26 billion in direct property tax relief, which includes $276 million for the Homestead Benefit, as well as the increased property tax deduction cap and expanded Senior Freeze eligibility that the governor and Legislature enacted in their previous budgets.
- Strengthening public education: The budget includes an additional $336.5 million for K-12 education formula aid, addressing the largest driver of property taxes. The budget also includes $50 million in stabilization aid, which will provide one-time assistance for districts facing fiscal challenges as the state properly funds the school funding formula.
- Expanding pre-K education: The budget continues efforts to expand pre-K education. Since 2018, Murphy has invested an additional $208.7 million to support high-quality preschool education. In FY2021, Murphy proposes $83 million in new spending, and $25 million of that amount will be used to assist approximately 30 additional districts that are ready to launch new programs.
- Transforming higher education: The budget introduces the Garden State Guarantee, which will add over $50 million of new funds to the outcomes-based funding formula, so four-year public colleges and universities can follow New Jersey’s community colleges and provide two years of free tuition to students with household incomes of less than $65,000 and all students with predictable pricing. This initiative will build on the success of the Governor’s Community College Opportunity Grants, which will continue to enable thousands of residents to attend community colleges tuition-free.
- Lowering the cost of health care: This budget funds the governor’s new Office of Health Care Affordability and Transparency, which will advance strategies to help consumers and create health care savings. The office will support the governor’s proposal to raise the income threshold by $10,000 for the Pharmaceutical Assistance to the Aged and Disabled program and Senior Gold programs, which will benefit over 21,000 seniors. Murphy also proposed creating a state-level health insurer assessment to reclaim revenue previously sent to the federal government. The administration will direct at least $200 million in revenue toward subsidies in 2021 for New Jerseyans purchasing health insurance.
- Supporting local governments and shared services: The governor says his budget continues his commitment to achieving property tax savings through innovative shared services efforts. The proposed budget includes nearly $20 million to maintain the Local Efficiency Achievement Program, fund county-level dispatch centers and restore payments for Open Space preservation, all of which will ultimately decrease costs for municipal governments. The budget also continues last year’s efforts to lower public health care expenses — which has led to rate decreases of at least 4% for participating municipalities and school districts — and invests at least $60 million from the Affordable Housing Trust Fund to support municipalities’ financial obligations to develop affordable housing.
- Preparing a world-class workforce: The Department of Labor & Workforce Development will allocate over $20 million to advance the governor’s Jobs NJ plan. These funds will support apprenticeships, paid internships, incumbent career training and targeted solutions for businesses facing talent challenges.
- Supporting the business community: The budget will support a permit modernization project to make state requirements more efficient and transparent. The budget will also triple support for the Commission on Science, Innovation and Technology to advance collaborations between industry and academia.
- Fast-tracking New Jersey Transit improvements: The budget includes a general fund subsidy of nearly $600 million, which is a $132 million increase over FY2020, to support the agency’s daily operations, while allowing for bus and rail enhancements, new hiring and a Battery Electric Bus program that advances the state’s clean energy goals. If the governor’s proposals are enacted, NJ Transit will run for its third consecutive year under Murphy without a fare increase.
- Sparking clean energy opportunities: The Clean Energy Fund will have $263 million for Clean Energy programs, compared with an average $177 million under the Christie administration. In addition to supporting energy efficiency programs and $30 million worth of electric vehicle rebates, the Clean Energy Fund will also support the launch of a Green Bank and clean tech incubators.
- Facilitating sustainable development: The budget proposes an $80 million appropriation to the Drinking Water Program as a first step of the administration’s plan to ensure safe and modern water infrastructure.
- Defending women’s health care and family planning services: After restoring funds cut by the Christie administration and replacing federal funding threatened by President Donald Trump’s administration, Murphy’s budget proposes nearly $20 million for family planning services in FY2021. This budget also advances first lady Tammy Murphy’s Nurture NJ program to ensure more equitable maternal and infant care and outcomes.
- Fighting the opioid epidemic: Murphy will maintain his $100 million commitment, now through over 30 programs across eight state agencies, to fighting the opioid crisis through carefully designed programs and thoughtful, data-driven analysis to put resources where they are most needed.
- Addressing behavioral health needs: Murphy’s budget invests at least $45 million in the Children’s System of Care to rebalance out of home and in-community service rates for the first time in 15 years so the state can better serve children with emotional and behavioral health care needs.
- Reducing environmental harms: As part of Murphy’s statewide plan to address lead exposure, the budget invests in data infrastructure and outreach to prevent childhood lead poisoning. It also provides funds for preschool facility lead remediation. The Clean Energy Fund will support a Whole House pilot, which provides holistic energy-efficiency and health-related interventions for low-income residents. The budget also provides grant funding and staff to reduce the prevalence of harmful algal blooms to protect public health and local economies.
- Expanding poverty relief: The governor says his commitment to increase the Earned Income Tax Credit to 40% and proposes expanding EITC age eligibility from 25 to 21 to assist tens of thousands of more young adults. The budget also enables counties to operationalize Code Blue programs so they can help homeless residents obtain shelter.
- Leading on criminal justice reform: After signing landmark bills this past year to reform the criminal justice system for both juveniles and adults, the budget includes almost $30 million in implementation funds for Earn Your Way Out and Hepatitis C treatment, as well as new funds for transitional housing and job training.
Murphy knows that this is only a wish list and said as much in his speech.
“I know that the budget I receive back won’t look exactly like the one I am handing you,” he said. “But, I know that by working together, we will arrive at a budget that continues to restore the faith that we can work together for the common good, and that we can deliver upon the promises we’ve made to our middle-class families — and, just as importantly, to those striving to join our middle class.”
Murphy and the Legislature have to enact a budget by June 30.