The largest spending proposal in state history includes $2 billion in broad-based tax relief, plus billions to address debt. (Photo by Chris Boswell/Getty Images)
Committees in both chambers of the Legislature approved a $50.6 billion spending bill Monday evening, preparing the record spending plan for votes before both chambers of the legislature on Wednesday.
Gov. Phil Murphy is expected to sign the 277-page budget on Thursday, the deadline to avoid a state shutdown that would be embarrassing and politically damaging for him and Democrats that hold control of both legislative chambers.
“The bottom line is that this budget is something we can be proud of regardless of what side of the aisle you’re on because every New Jersey resident will benefit from this $6 billion surplus, not just this budget, but budgets moving forward,” said Assemblyman Benjie Wimberly (D-Passaic).
The bill’s passage was delayed for hours as lawmakers waited for a completed draft, which arrived nearly eight hours after the Senate budget panel’s scheduled start time and more than nine hours after the Assembly’s budget committee hearing was set to begin.
Headlining the budget is the ANCHOR property tax relief program, a $2 billion replacement to the popular Homestead Benefit Program. State officials say ANCHOR will provide a $1,500 property tax credit to New Jersey homeowners making no more than $150,000 annually, with a $1,000 credit for those earning between $150,000 and $250,000.
Renters with incomes of no more than $150,000 can expect annual tax rebates of $450 under the program. The average benefit under Homestead was $627, and those awards were paid to a smaller pool of homeowners.
The budget also includes a recently announced sales-tax holiday expected to cost the state roughly $75 million in foregone collections. Senate President Nicholas Scutari (D-Union) said last week the 10-day tax holiday is intended to help consumers struggling with higher prices.
Republicans said both programs send too little back to taxpayers.
“We would give back a lot more of this money. I appreciate the suggestion that the ANCHOR program is substantial, but it’s not,” Sen. Declan O’Scanlon, the chamber’s Republican budget officer, said shortly before the panel’s budget vote. “No one would see anything for almost a year. It would be this time next year.”
Earlier Monday, Republicans made a failed bid to move their own tax relief measures, which include $4.5 billion in one-time tax rebates and several permanent tax hikes.
The topline budget figures represent a sizable increase from the spending totals Murphy proposed in his budget address in March, when he pitched just under $49 billion in expenditures.
But even amid growth in spending, the state will see a larger surplus than the governor proposed. New Jersey will put about $6.3 billion in reserves this fiscal year, up from the $4.2 billion the governor proposed in March.
Lawmakers intend to leave $4.2 billion in the state’s Debt Defeasance and Prevention Fund, Sen. Paul Sarlo said. The fund is used to pay down existing debt to save the state money on interest and to directly fund capital projects, forgoing the need for future borrowing. The fund will be filled with state money and federal aid.
The budget sets aside nearly $1.8 billion in federal American Rescue Plan aid for capital projects around the state, including $300 million each for Rutgers University and lead water line replacement, $170 million for lead paint remediation, and $120 million for Schools Development Authority capital projects.
Separately, the budget deposits $305 million in federal dollars into the state’s Affordable Housing Production Fund. That fund will pay for the construction of new affordable housing to help municipalities meet obligations set by the courts.
The spending bill includes roughly $12.7 billion in direct aid for schools, including about $1.5 billion in special education aid. Sarlo said the focus on tax relief from Murphy and lawmakers prevented them from reaching full school funding levels.
“The ANCHOR program is a $2 billion property tax program, so at the end of the day, we couldn’t do it all,” he said.
Last year, Murphy and lawmakers agreed that the Legislature’s Joint Budget Oversight Committee would approve the use of federal funds. That panel will retain some control over state expenditures of federal aid for the upcoming fiscal year, but new language replaces the approval process put in place in 2021.
Under the new system, the governor must submit funding requests to the joint panel, which must meet to consider them within 45 days. If they don’t convene, the request will be automatically approved, Sarlo said, adding the Senate’s budget committee will hold oversight hearings on the expenditure of federal funds.
Alongside the budget, legislators on Monday approved the creation of a state-level child tax credit. Championed by progressive advocates, the program would give residents a tax credit worth up to $500 per child, with adjustments depending on income. The award is at its full level for those making $30,000 and decreases by $100 for every $10,000 in income above $30,000.
“We are under no illusion that this credit alone will end child poverty, but this commitment will go a long way for the working- and middle-class families who qualify,” said Nicole Rodriguez, president of New Jersey Policy Perspective, a progressive think tank that advocated for the policy. “This credit can also be expanded and built on in future years, which we think lawmakers will do once they see its success.”
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