Budget would give Governor Murphy control over more federal aid spending

Municipalities get $75M in long-diverted energy tax receipts

By: - June 29, 2022 6:39 am

Gov. Phil Murphy this year pushed to eliminate legislative control over federal spending, leading to objections from Democratic lawmakers. (Danielle Richards for New Jersey Monitor)

Gov. Phil Murphy and lawmakers are set to face a new process for approving the use of federal American Rescue Plan funds under the $50.6 billion budget bill lawmakers are set to approve Wednesday.

Language in the budget as passed by legislative budget committees Monday would give the governor a $300 million pot of federal money he can use without approval from the Joint Budget Oversight Committee, a panel of lawmakers that will retain approval powers over most other American Rescue Plan expenditures.

Of that $300 million, Murphy can make one allocation of up to $60 million without seeking legislative approval but is limited to allocations of $20 million or less for the remaining funds. All spending of the funds must be related to the pandemic.

New Jersey received about $6.2 billion in aid from the American Rescue Plan in 2021 and has spent half of it. As part of the budget bill, the governor and legislators have agreed to set aside $2.4 billion of the remaining funds for a series of capital projects — like $170 million for lead paint remediation and $300 million for projects at Rutgers University — leaving roughly $1.1 billion subject to Joint Budget Oversight Committee approval.

Budget language requires the bicameral committee to meet quarterly. If they don’t meet in a given quarter, any proposal submitted to them by the Murphy administration more than 45 days before the end of a quarter is automatically approved.

Language in last year’s budget provided Murphy with a pool of $200 million in federal funds from which he could make allocations of up to $10 million without seeking approval of the joint budget panel, while other spending required the committee’s OK.

During this year’s budget process, Murphy sought removal of the language requiring legislative approval for spending American Rescue Plan funds, leading to objections from Democratic leaders, including budget chairs from both committees. But the agreement on the $300 million appears to have allayed all risk of intraparty conflict over the issue.

“In the coming days, Governor Murphy looks forward to signing the budget he negotiated with legislative leadership,” said Murphy spokeswoman Alyana Alfaro Post.

The governor is expected to sign the budget Thursday, the last day to do so without triggering a government shutdown.

Energy tax receipts

Municipalities scored a long-sought win in this year’s budget negotiations with a partial return of energy tax receipt collections that have for years been diverted to state coffers.

The state collects those levies on utilities with the intent of returning the proceeds to municipalities, but since 2008, budget language has diverted those dollars into New Jersey’s general fund. The diversions were initially a response to budget woes following the Great Recession, but have continued since, pulling more than $330 million out of towns and cities annually.

Municipalities will see a return of $75 million of that revenue this year.

“It’s a mixed bag, but as long as it’s a first step in the right direction, then obviously it’s a positive step,” said Michael Cerra, executive director of the New Jersey League of Municipalities, which has for years urged lawmakers to reverse the diversions.

It’s not clear whether the change indicates lawmakers will return more of the energy tax revenue to towns and cities in future years. Cerra said this year’s push has prepared local elected officials to lobby legislators on the issue.

“We had folks in office who never saw the full funding, and some didn’t even realize this funding is collected by the state for local purposes and it’s been diverted,” Cerra said. “Now, we have a membership that is fully briefed on the issue, more engaged on it than ever before, so I do think we’re in a good position to continue moving toward restoration.”

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Nikita Biryukov
Nikita Biryukov

Nikita Biryukov most recently covered state government and politics for the New Jersey Globe. His tenure there included revelatory stories on marijuana legalization, voting reform and Rep. Jeff Van Drew's decamp to the Republican Party. Earlier, he worked as a freelancer for The Home News Tribune and The Press of Atlantic City.