Despite criticisms that it spends too much and again raises taxes, Gov. Phil Murphy’s FY 2020 budget improves New Jersey’s finances and puts the state on a path toward fiscal responsibility, according to State Treasurer Elizabeth Maher Muoio.
NJBIA and other groups have criticized the governor for proposing to increase spending more than 11 percent over two years and not doing enough to address the fundamental structural problems of New Jersey’s finances. Muoio, however, made the case that Murphy’s budget is fiscally responsible to about 80 business leaders at a Meet the Decision Makers event this morning held by NJBIA and the New Jersey State Chamber of Commerce.
Several components of the budget are aimed at addressing criticism from credit ratings agencies that have repeatedly downgraded New Jersey in the last decade, she explained.
“The governor recognizes that in order to build a stronger and fairer New Jersey, we must break the bad habits of the past that have led to today’s problems,” Muoio said.
Consider that the governor’s budget:
- Saves $800 million from state employee health plans;
- makes the highest-ever pension contribution ($3.8 billion) for the second year in a row;
- projects the first $1 billion surplus in a decade;
- reduces one-shot revenue sources to less than 2 percent; and
- drastically cuts back the practice of diverting dedicated funds to general revenues.
“Not only are these components all keys to a healthier fiscal outlook, they’re important in the eyes of rating agencies when it comes to stabilizing our credit worthiness,” Muoio said. “This is something the governor takes very seriously. In fact, he visited the big three ratings agencies just last week because he believes strongly in making his case for fiscal responsibility directly to the rating agencies, something that wasn’t typically done in the recent past.”
Pension contributions, health benefit costs, and one-shot revenue sources have plagued New Jersey budgets for years. The state skipped pension payments going back to the 1990s and now has one of the biggest pension liabilities of any state in the country. Even the proposed budget surplus, the highest in over a decade for New Jersey, is woefully short of the national average, Muoio acknowledged.
It’s no surprise then that New Jersey has seen its credit rating fall 11 times, all before Murphy became governor, and has one of the lowest credit ratings of any state in the nation.
Murphy proposed a $38.6 billion budget on March 5, a 3.2 percent increase over the previous fiscal year, and proposed raising revenue by increasing the income tax on those making over $1 million, imposing a fee on certain businesses that do not provide health benefits, and taxing legalized marijuana.
Making the case for fiscal responsibility in the governor’s budget, Muoio this morning pointed out that the spending plan eliminates what had been an annual diversion of funds from the Affordable Housing Trust and cut the diversion of the Clean Energy Fund nearly in half. NJBIA has been critical of the practice of diverting dedicated funds to the general budget.
“It is critical that we find sustainable revenue sources moving forward,” Moiuo said. “Ratings agencies have been clear on that. This budget does propose a revenue increase, but it also proposes significant savings. This is the balance that the governor has proposed.”