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Phil Murphy Approves Budget With Pension Payment, College Aid

New Jersey’s $46.4 billion budget will allocate some funds towards public pensions, tax deductions for college aid and small property tax relief payments. Republican lawmakers worry the increased spending will result in future cutbacks.

(TNS) — Gov. Phil Murphy on Tuesday signed a $46.4 billion state budget that increases spending to record levels for the next year with the help of a remarkable, $10 billion surplus that’s become an emblem of New Jersey’s fast recovery from the coronavirus pandemic.

Despite fears a year ago that the health and economic crises would decimate state revenues, tax collections have surged to new highs, enabling Murphy and fellow Democrats who control the state Legislature to cut taxes for seniors and low- and middle-income households in a crucial election-year budget.

The spending plan includes a historic $6.9 billion contribution to the public pension fund, new tax deductions for college savings, tuition and loans, a small boost for property tax relief and tax rebates of up to $500 for more than 760,000 New Jersey families.

The state may begin sending out rebate checks to qualifying taxpayers who have filed their 2020 returns as early as Thursday, a Treasury Department spokeswoman said.

Murphy signed the spending bill at a Woodbridge elementary school gymnasium, where he said the budget seeks to build prosperity “from the middle out and from the bottom up.”

“After a year in which the pandemic disrupted practically every facet of our lives, a year we focused everyday on savings lives — even though we have lost, it’s unfathomable, over 26,000 members of our New Jersey family, a year in which so many in our state were knocked down but not out, New Jersey is now standing before the dawn of the new post-COVID day that is breaking,” the governor said. “And this is the budget that will see to it that this day is better than yesterday.”

After several years of budget brawls over the governor’s demands to raise taxes on high-income households and under the glare of an election spotlight — the governor and all 120 legislative seats are on the November ballot — Murphy and legislative leaders negotiated in private, working off the governor’s own budget blueprint. Awash in cash, their deliberations centered on how to spend the money and precisely who has the authority to spend it.

Republican lawmakers were critical of the spending in the budget which they said puts New Jersey on a path to big tax hikes or harsh cuts in just a year or two. They derided the hundreds of millions of dollars in earmarks added by the Legislature for nonprofit organizations and parochial projects as “pork,” and said the state is wasting an opportunity to return more money to taxpayers and right its own fiscal ship.

State Senate President Stephen Sweeney, D- Gloucester, pushed back against the criticism Tuesday, saying, “It’s not pork, it’s people.”

“We are finally in a place where we can make an investment, a real investment, in our people,” he said.

Progressive advocates, too, condemned the Legislature’s rush to adopt the budget last week as “anti-democratic” and blasted its failure to provide aid to undocumented immigrants excluded from federal stimulus measures and a dedicated source of funding for NJ Transit.

“By refusing to fund excluded immigrant workers, the state has placed too many families in a place where they are out of money, out of food and out of time,” Amy Torres, executive director of the New Jersey Alliance for Immigrant Justice, said in a statement. “But with a budget surplus and influx of federal dollars, the state is not out of options. New Jersey can and must do more to fund immigrant families.”

In addition to the income tax rebates and higher education tax deductions, the budget cuts taxes on retirement distributions and expands eligibility for the Earned Income Tax Credit and Child and Dependent Care Credit.

Murphy and legislative leaders agreed also to set aside $3.7 billion – an amount equal to the money borrowed in the fall — to clear some existing debts off the state’s balance sheet and and pay future infrastructure projects out-of-pocket.

They also plan to top off the state’s first full contribution to the pension fund for public workers in a quarter century with an extra $505 million. Next year’s $6.9 billion planned payment will be the state’s largest by far and may curry favor with the Wall Street rating agencies that have scolded New Jersey for shorting contributions to the beleaguered fund — or skipping them altogether.

“We are living up to our obligations today and not pushing them off at a higher cost and greater weight onto the shoulders of the next generation,” Murphy said Tuesday. “This is the administration where the shirking of our obligations has stopped.

“Now let’s not fool ourselves,” he continued. There is still work to do to bring our pensions systems back to full health, and that work will take more years of commitment and fiscal responsibility. But today is the day we stop looking up from the bottom of the deep hole that previous administrations had dug over 25 years. Today is the day we start filling this hole in for good.”

New Jersey’s public schools will receive nearly $9.3 billion in direct aid next year, a boost of $578 million over this year. Some districts will continue to lose funding as the state redistributes aid from those considered overfunded under the school funding formula to those considered underfunded.

The budget includes $924 million in preschool aid, $50 million more than this year, and $400 million in extraordinary special education aid. The addition of $125 million in extraordinary special education aid, pushed by the Senate president, means the state will finally meet its obligation to reimburse local school districts for 85 percent their extraordinary special education expenses.

Under the budget, the Homestead property tax program will get a long-awaited update that will increase the average credit to seniors and disabled homeowners by more than $130 and the average benefit to low-income homeowners by $145.

Murphy’s administration estimates 70,000 New Jersey seniors will be able to receive a partial benefit a tax break on retirement distributions, as the budget raises the income thresholds to $150,000. The program hard cut-off at $100,000 has aggravated taxpayers who lose the entire pension exclusion if their income is even $1 over that limit.

There are also income tax rebates nearly on the way for 764,000 households with income below $150,000 and at least one dependent child. The rebates were part of a deal forged last fall to raise income taxes on high earners.

According to the state Treasury Department, 716,000 couples with income below $150,000 filing jointly would receive an average of $425, while the nearly 48,000 single filers with income below $75,000 would receive an average of $297. While the maximum credit is $500, many household will receive less because it is nonrefundable, which means it cannot exceed a family’s tax liability.

The budget creates new tax deduction for households with income below $200,000, who will be able to deduct their first $10,000 in contributions to an NJBEST 529 savings plan, $10,000 in in-state tuition payments and $2,500 in NJCLASS student loan payments. The budget includes $50 million to fund two years tuition-free at a four-year college for students from low-income families and $10 million to provide $750 in matching contributions to a 529 account to encourage college savings in families with less than $75,000.

“The Garden State Guarantee comes with a simple promise: If you work hard, we have your back,” Murphy said.

Young adults between 18 and 21 years old and seniors without dependents will be newly eligible for Earned Income Tax credits, while families with income up to $150,000 will qualify for the Child and Dependent Care Credit.

The new budget also dictates how state officials will appropriate the state’s federal windfall, and gives the Legislature’s Joint Budget Oversight Committee approval power over the governor’s recommendations. Lawmakers from both parties had sought to assert control over the $6.2 billion federal dollars, as language in this year’s budget gives Murphy broad authority to appropriate emergency disaster aid and economic stimulus.

Murphy will retain authority over $200 million, which he can spend in increments of up to $10 million without legislative say-so.

As part of the budget agreement, the Democrats agreed to begin doling out federal aid, including $500 million in rental assistance, $250 million in utility relief, $600 million over three years to offer an extra year of eligibility for the state’s special education program to roughly 8,700 students with disabilities, $180 million for HVAC improvements in schools and small businesses, $100 million for childcare centers and $450 million to improve emergency preparedness infrastructure at the state’s Level I trauma centers.

©2021 Advance Local Media LLC. Distributed by Tribune Content Agency, LLC.
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