The spending Gov. Phil Murphy proposed in his FY 2021 budget is only part of the story of New Jersey’s finances, as the governor has issued more than a billion dollars in new spending in the previous year’s budgets—spending the Legislature does not get the same chance to review and approve until it is really too late.
Testifying earlier this week on the Governor’s proposed budget, NJBIA Vice President Chris Emigholz told the Senate Budget and Appropriations Committee that Murphy’s first three budget proposals included billions of dollars in new mid-year spending beyond what was approved by the Legislature. The spending was fueled by revenues coming in ahead of projections: $1.2 billion in new spending for FY2018, $700 million for FY2019, and $1.3 billion for FY2020.
“That equates to Governor Murphy assuming increased spending of about 3% only eight months after the budget was approved and without new legislative approval,” Emigholz said. “This new spending every year puts us further into a budget hole. Holding the line on new spending would make any tax increases unnecessary and the budget a more fiscally responsible plan.”
This new mid-year spending may not be so bad if it were accompanied by naturally occurring revenue increases. But mid-year revenue increases over these first three budget proposals have only amounted to about $2 billion while mid-year spending has increased $3.2 billion or about one percentage point more than the mid-year revenue increases.
The $40.9 billion proposed budget would increase spending by $2.2 billion or 5.7% more than the current FY2020 budget.
While supporting a number of provisions in Murphy’s proposal, Emigholz told the committee that NJBIA opposes it because it relies on more than a billion dollars in unnecessary tax increases. The Governor has proposed numerous tax increases to support this excess spending, including $500 million in income taxes, $200 million from a new business tax dubbed the Corporate Responsibility Fee, $200 million more in cigarette taxes and a $200 million health insurance tax.
Emigholz pleaded for lawmakers to head in a different direction.
“Our nation’s and the world’s economy is currently in an alarming state of flux, so the FY2021 budget is certainly not the right time for tax increases that would increase the harm that the next recession may have on our state economy,” he told the committee. “Every New Jersey policymaker should focus on finding additional savings so that the already unnecessary tax increases are even less necessary.”