Primer on New Jersey’s Budget

About 25 members of Indivisible Lambertville New Hope came together on April 22 to hear three representatives from the progressive policy think tank New Jersey Policy Perspective explain the state’s budget process, what the critical budget issues are, and how citizens can get involved in shaping the state’s spending so that it serves all New Jerseyans. Here’s what we learned.

First, the timing

In February of each year, after about six months of planning and analysis with agency and department heads, the state treasurer, and the Office of Management and Budget, the governor proposes a budget, to take effect July 1, and delivers what’s known as his “budget address,” in which he highlights the revenues he believes the state will take in and the spending initiatives that he thinks are particularly important. This budget is only the first step in the process — the final budget may look very different — but it is the single most important policy statement the governor makes each year.

Next, there is a series of public hearings around the state on the governor’s proposed budget. Anyone may offer comments at these hearings, which become part of the public record, and the hearings are often the venue for advocates to make their case for more funding for their particular causes.

After the hearings are finished, the action moves to the Legislature, where appropriations committees in both houses conduct hearings with each of the agency and department heads and make changes to the governor’s proposed budget, on both the spending and the revenue-projection sides. Those hearings are going on now, and will be finished by the middle of May.

Between the middle of May and the end of June, which is the deadline by which a budget must be passed, the governor and the leaders of both houses — Senate President Steve Sweeney and Assembly Speaker Craig Coughlin — negotiate to synthesize all the changes into a revised budget. Both houses must pass this budget. The governor can then sign it, veto it, veto it conditionally and send it back for changes, or veto individual items in it. New Jersey’s constitution requires a balanced budget, so when the governor signs it he is “certifying” that the spending in the budget will not exceed projected revenues. If the July 1 deadline is not met, the government shuts down until a budget is adopted and signed.

What’s in the 2020 budget?

According to NJPP’s “rapid reaction” analysis, Governor Murphy has proposed a $38.6 billion budget that includes several significant things that will help those who are struggling the most to get by:

• $200 million more than 2019 for K-12 education
• $68 million more for pre-K expansion
• $100 million more for NJ Transit
• Restoration of $59 million for the Affordable Housing Trust Fund
• $33.5 million more for the new free community college fund, as well as increases for both Tuition Aid Grants and the Educational Opportunity Fund
• An increase in the earned income tax credit to 39% refundability, up from 37% last year
• The largest pension payment in state history
• Big savings in public employee health care benefits
• New revenue in the form of a true millionaires’ tax
• A $1.1 billion surplus

Of this list, perhaps the most important thing on which to focus is the millionaires’ tax. Right now, New Jersey has a “$5x-millionaires’ tax” — a 10.75% tax on earnings over $5 million. Governor Murphy’s proposal would apply that marginal tax rate to earnings over $1 million (right now, earnings between $1 million and $5 million are taxed at 8.97%).

Doing this would generate significant new revenue after many years of tax revenue cuts, and would take some of the tax pressure off middle-class families. But the Legislature has been cool to the idea, citing a concern that raising taxes in an already high-tax state will drive our wealthiest residents out. There is a real possibility that the millionaires’ tax won’t make it into the final budget.

What you can do:

• Call your state legislators — if you don’t know who they are, you can find out here — and tell them you support the millionaires’ tax and you want them to make sure it stays in the budget. Every call makes a difference. They need to hear from their constituents that they should do the right thing, especially this year since the Assembly is all up for re-election in November.
• Ask your legislators to make a public statement in support of the millionaires’ tax. This can help sway legislators who are undecided.
• Write postcards to your legislators in support of the millionaires’ tax.

More generally, to stay up to date on the status of the budget, follow good Statehouse reporters from NJ Spotlight, The Star-Ledger, The Record (they will be assigning a new reporter soon), and Politico.