Early this week, the Assembly Budget Committee and the Senate Budget and Appropriations Committee began a series of hearings on Governor Murphy’s proposed spending plan for the 2020 Fiscal Year. The process started with a focus on revenues, projected to be available for the balance of the current (FY 2019) fiscal year and for FY 2020.
Testimony was presented by Office of Legislative Services (OLS) Budget and Finance Officer Frank Haines, by OLS Revenue, Finance and Appropriations Section Chief David Drescher, and by State Treasurer Elizabeth Maher Muoio.
Haines’ focused on the State’s projected surplus ($1.2 Billion) for FY ’20. While an improvement over recent past balances, the State’s roughly 3.1% surplus is less than the 8.4% average among all states. That surplus could support average daily State of New Jersey spending for 8 days. The median 50 state surplus could support average state programs and services for 40 days. Haines suggested that the Legislature might want to consider the adequacy of the surplus “… in different contexts of budgetary challenges, like surges in service demand, emergencies, and changing economic conditions, including a recession.”
Regarding the State’s current Fiscal Year, Drescher said, “Personal income tax and sales tax collections so far this year have been considerably less than originally assumed in the budget, while corporate tax collections have jumped to more than make up the shortfall. …OLS expects that the current fiscal year revenues will outpace the targets used to develop the budget by about $218 million.”
Discussing the upcoming (FY ’20) spending plan, Muoio stated, “… the budget is built on four strong pillars …” They are, in the Treasurer’s words, “Number one is smart and strategic savings … Number two, this budget is built on fiscal responsibility with an eye towards restoring our credit worthiness … Number three, this budget continues to invest in our shared priorities …” (Specifically, the Treasurer highlighted NJ Transit, Pre-K education, higher education, reducing the Clean Energy Fund diversion, and the elimination of the Affordable Housing Trust funds diversions.), and “Number four, this budget continues to build on our goal of tax fairness … .” (A reference to the Governor’s proposed expansion of the “Millionaires’ Tax” and the expansion to the Earned Income Tax Credit.)
Treasurer Muoio noted that, “… there is an estimated $812.5 million in one-time revenues for FY19 that must be factored out of our base when projecting FY20 revenues.” This $812.5 million includes non-recurring corporate tax receipts, tax amnesty payments, and the expiration of the Estate Tax. To compensate for those losses, the Governor’s budget calls for tax policy changes that would generate an estimated $558 million. These changes include the expansion of the “Millionaires’ Tax,” revenues from the state tax on recreational cannabis sales, a Corporate Responsibility Fee on large employers that do not provide health insurance benefits to employees, and an assessment on opioid drug manufacturers and distributors. (The latter of which would be used to fund efforts to attack the opioid epidemic.)
Taking account of revenue trends in all state funds, for the current Fiscal Year OLS projects $109.2 million less than the $37,410.3 million projected by the Executive Branch. Assuming the Governor’s tax policy initiatives are adopted, for FY 2020, OLS projects $182.7 million less than the $38,832.9 million forecast by the Administration.
Contact: Lori Buckelew, Senior Legislative Analyst, firstname.lastname@example.org, 609-695-3481, x112.