Governor Murphy announces record $53.1 billion spending plan
Plan would maintain $2B tax rebate program, double child tax credit
Gov. Phil Murphy delivering his fiscal year 2024 budget address in the Statehouse in Trenton on Feb. 28, 2023. (Edwin J. Torres/NJ Governor’s Office)
Gov. Phil Murphy proposed $53.1 billion in spending Tuesday for the fiscal year that begins July 1, asking lawmakers to approve the costliest budget in state history while avoiding direct tax increases amid a continued focus on state affordability.
The $2 billion ANCHOR property tax relief program would return for a second year under Murphy’s plan, joined by a doubling of the state’s child tax credit, expanded eligibility for the senior freeze program that lowers property taxes for elderly homeowners, and hundreds of millions in aid to combat rising costs faced by local governments.
“This budget was built with you in mind and to secure your place,” Murphy said. “For the third year in a row, it has no new taxes and more middle-class tax relief.”
ANCHOR’s provisions under Murphy’s plan would be unchanged from the current year’s budget. Homeowners who make $250,000 maximum would receive a $1,000 award, or $1,500 if they earn up to $150,000 annually. Renters with incomes of $150,000 or less are eligible for $450 checks.
ANCHOR awards for the coming fiscal year are based on the 2020 tax year.
Solid state revenue will also allow for a proposed expansion of the state’s child tax credit, Murphy said. He proposed doubling the maximum refundable per-child credit to $1,000.
“This will give working and middle-class parents an even bigger tax break,” the governor said. “And, for parents also juggling the cost of child care, it will partner with our child and dependent care tax credit to do even more to lower their costs.”
Murphy is asking for an additional $832 million in school formula aid. The increase is the sixth of seven planned hikes meant to align state school funding with the state’s funding formula. Murphy also wants to set $110 million aside to back the expansion of universal preschool.
The governor also wants to increase income limits for the senior freeze program, which locks in property tax rates for some elderly filers. The governor asked lawmakers to raise the program’s income eligibility limit by more than 50% from $99,735 to $150,000.
A back-to-school sales tax holiday lawmakers enacted last year may also return in the coming fiscal year, but officials have pared back expectations on how much money the program would save residents to roughly $40 million, from $70 million.
The governor also asked lawmakers to spend $200 million in municipal aid to defray cost increases faced by towns and cities, including voluminous public health benefits plan rate hikes approved in the fall.
Murphy’s proposal is buoyed by state revenue that has, so far, exceeded expectations.
While Treasury officials expect lackluster tax collections on returns filed in April, state revenue is expected to exceed last year’s forecasts by $3.7 billion in the fiscal year ending June 30.
Revenue is expected to decline only slightly in the year that begins July 1, dropping from $54.1 billion to $53.8 billion. Those collections will still leave the state flush with cash.
Even the sunset of a 2.5% corporation business tax surcharge applied to profits above $1 million won’t make revenues look any less rosy. That surcharge, which will expire with the end of the calendar year, accounts for about $323 million in foregone revenue in the coming fiscal year, Treasury officials said. It will cost the state about $1 billion in missed revenue in fiscal 2025.
Murphy asked for a $10 billion surplus, though it’s likely lawmakers will draw that number down somewhat to fund legislative priorities before approving the budget in June. At present, forecasted revenue exceeds proposed spending by $744 million.
Republican lawmakers met Murphy’s address with little enthusiasm, charging the two-term Democrat should propose cutting taxes and take up a GOP proposal to tie the state’s income tax brackets to inflation.
“The Murphy administration continues to hoard tax overcollections while people are suffering,” said Sen. Declan O’Scanlon (R-Monmouth), the chamber’s GOP budget officer. “Instead of providing real tax relief to New Jerseyans, the governor is building a massive $10 billion surplus that will get devalued by inflation. We should focus on addressing tax bracket creep and providing inflation relief to New Jerseyans.”
Treasury officials said they do not expect major changes to budget language that lays out rules for directing $1.4 billion in unallocated federal American Rescue Plan funds.
Current rules require the administration to seek approval from a legislative committee for most federal spending, though language in the current year’s budget gave Murphy $300 million of federal funds he could spend without legislators’ say-so, with some restrictions.
The governor proposed the third full pension payment in as many years, though the state will pay slightly more this year — $7.1 billion — due to market conditions and inflation.
“We’ve embraced a radical philosophy for Trenton: Pay your debts and don’t spend more than you make,” he said.
Murphy also proposed depositing $2.35 billion into a state fund intended to save money by paying down debt — thereby avoiding interest — or directly funding capital projects and avoiding borrowing. That money would come out of the current year’s budget.
The governor’s budget proposal would maintain diversions to fund NJ Transit. The transportation network would receive a $140 million subsidy from the state’s general fund, $70 million from the clean energy fund, and $334 million in a transfer from the agency’s capital budget.
NJ Transit fares would stay level despite sharp post-pandemic declines in ridership.
“The facts bear out that NJ Transit is moving in the right direction,” Murphy said. “I stood here five years ago and said my administration would get NJ Transit working again even if it killed me. Well, I’m still here.”
He added a line not in his prepared remarks: “Much to the chagrin of some.”
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