2021 budget comes with new taxes, new spending, emergency borrowing, pension payment — and surplus

Gov. Phil Murphy proposes his fiscal 2021 budget earlier this year. (File photo)

In a speech reminiscent of a campaign rally, Gov. Phil Murphy released his revised budget proposal for Fiscal Year 2021 on Tuesday — one he said includes targeted cuts in state spending, fair tax increases, an emergency borrowing proposal and additional plans to invest federal funding to help close what would have been a nearly $6 billion budget hole as a result of the COVID-19 pandemic.

Murphy, speaking outdoors to a sparse crowd at SHI Stadium on the campus of Rutgers University in accordance with social distancing guidelines, said this new era called for new solutions.

“Over the past few months, we have learned hard lessons, but also important lessons: that the old answers won’t fix the new problems and that the old status quo didn’t work for too many New Jerseyans,” he said. “We must now have the unavoidable conversation about what it means to not only see our state through this emergency, but what we will look like when we emerge from it.

“This budget proposal is not simply about getting New Jersey back to where it used to be, but moving forward to where we need to be by building a new economy that grows our middle class and works for every single family, while asking the wealthiest among us to pay their fair share in taxes.”

The proposed $32.4 billion budget can be broken down in these buckets:

  • New taxes: Not just on millionaires and corporations, but also increases on other items, both small (cigarettes: up to $4.35 a pack) to big (yachts — end the $20,000 limit). This is expected to generate slightly more than $1.1 billion;
  • New spending: The budget has a number of new programs geared toward underserved communities, including U.S. Sen. Cory Booker’s (D-N.J.) Baby Bonds idea, which would give $1,000 to most children born in the state;
  • Spending cuts: Murphy stressed that he pushed state government agencies to find savings of more than $1.25 billion through spending reductions and solutions across all executive state departments;
  • Emergency borrowing: Of at least $4 billion to help fill budget gap;
  • Pension payment: Of $4.9 billion — or roughly 10% of the budget;
  • A surplus: Of at least $2.2 billion to ensure preparedness against future calamities.

Murphy also was proud of the programs he was able to preserve, including:

  • Schools: The budget does not cut K-12 aid, postsecondary tuition assistance or operating aid for senior public colleges and universities;
  • Homestead: It restores funding for the Homestead Benefit and Senior Freeze property tax relief programs and does not decrease core municipal aid;
  • Medicaid/child tax credit: It does not impose new burdens on Medicaid recipients or curb the Child and Dependent Care Tax Credit.

The budget was widely praised by progressive groups and soundly panned by business groups.

It now goes to the Legislature, which will begin work on the process of reaching an agreement required by Sept. 30.

Assembly Speaker Craig Coughlin (D-Woodbridge) said he knows it will be a challenge.

“As I have previously stated, the unprecedented economic crisis brought on by the COVID-19 pandemic will inevitably make this one of the most challenging budgets we’ve ever had to face,” he said.

“The unparalleled loss of revenue and the compelling need of New Jerseyans is undeniable and will cause us to make difficult decisions. Assembly Democrats will work with the Senate and the Governor’s Office to craft a budget that makes those hard choices.

“We will keep an open mind, as we understand every option and proposal must be thoroughly reviewed and vetted. All options are on the table.”

Murphy said the next month will determine how New Jersey responds to the COVID-19 challenge. He ended the address in full campaign swagger.

“Will it be that our state — faced with historic challenges to our physical security, our public health, our economic well-being, our very sense of who we are — shrank back to the place it was, with inequality in opportunity?

“History will not be kind to us if it is.

“Let our heritage be that we did what generations of New Jerseyans before us did — harnessed our ability to adapt and innovate, embraced our diversity, created new opportunity and charged ahead, unafraid to lead, with our heads held high.

“So, together, let’s build a New Jersey that looks forward, not backwards.

“A New Jersey where we all pitch in so we can all do better. A New Jersey working for all with an economy working for all.”

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