The Office of Legislative Services (OLS) and State Treasurer Elizabeth Maher Muoio appeared before the Assembly Budget Committee today to discuss the FY 2020 Budget as proposed by Governor Murphy, including revenue projections for the current fiscal year (FY 2019) and next fiscal year (FY 2020). OLS and Treasurer Muoio will present a similar update before the Senate Budget Committee tomorrow.
Typically, during the hearing, the Legislature examines the proposed budget and has the opportunity to pose questions to both OLS, as well as the Treasurer’s office. Much of today’s discussion focused on the revenue estimates, impacts of past tax increases and the proposals included in the FY 2020 Budget.
Please find a brief summary of the hearing below.
The combined OLS revenue estimates are $292 million less than the projections in the budget as proposed by Governor Murphy. Specifically, the OLS revenue estimates for FY 2019 are $109.2 million below Governor Murphy’s estimates, and $182.8.6 million below the budget estimates outlined for FY 2020.
With respect to Treasurer Muoio’s testimony, some Democratic committee members commented the Governor’s proposed budget is more reasonable than FY 2019, while some Republican members of the committee felt the budget continues to spend funds the state does not have, while raising broad based taxes.
During her testimony, Treasurer Muoio discussed the four pillars that the Governor has based the FY 2020 Budget on – fiscal responsibility, sustainable savings, continued investments and tax fairness. The FY 2020 Budget proposes to extend New Jersey’s current 10.75 percent top gross income tax rate, which is currently applicable on all income over $5 million, to all income over $1 million. The Treasurer discussed how it can be difficult to predict when tax incentives will be taken as part of the state budget. She also noted how an increased general fund balance is important to the rating agencies, as it helps protect the state in the case of a fiscal emergency.
The Treasurer detailed many of the proposals in the FY 2020 Budget including the Governor’s opioid strategy, which calls for increased fees or assessments on opioid drug manufacturers and distributors. The Treasurer noted that she didn’t anticipate costs to be passed onto patients and that the proposal is being based on legislation passed in Minnesota.
Treasurer Muoio outlined the sustainable savings in the budget, including $800 million in health care savings, along with $200 million in governmental and departmental savings. When questioned by committee members, the Treasurer commented that some of these savings are based on future negotiations.
The Treasurer also discussed the new taxpayer behavior that is being seen as a result of tax reforms at both the state and federal levels, and how this complicates revenue projections. After being questioned by members of the committee, the Treasurer noted that while Corporation Business Tax (CBT) collections have been robust, they are not yet able to determine how much revenue can be attributed to the surcharge, and how much is a direct result of the other changes to the CBT made last year. She added that they expect to have that information available in October. The Treasurer also added they expect Gross Income Tax (GIT) revenues to rebound in April. Some members of the Legislature questioned whether revenues will meet the projections outlined by the Treasurer.
Lawmakers questioned the Treasurer on a number of topics including the Transportation Trust Fund (TTF). She noted that the FY 2020 Budget does not assume an increase in the state’s gas tax for the coming year and that $3 billion has been dispersed from the TTF.
After being asked by members of the committee, the Treasurer also discussed the Community College Opportunity Grant (CCOG) program, how the funds are still being dispersed and the expansion of the program in the future to include all 19 community colleges. The committee noted that not all FY 2019 allocated funds have been spent for the “free community college” program.
Members of the committee also discussed the impact of the recent increase to the state’s minimum wage, outmigration and its impact on state revenues, and outstanding pension and health benefit liabilities and what may be done to address them in the future.
I have included links to the OLS Tax and Revenue Outlook, as well as the remarks made by OLS and Treasurer Muoio, below:
- OLS Tax and Revenue Outlook
- Legislative Budget and Finance Officer’s Testimony
- OLS Revenue Forecast Testimony
- State Treasurer’s Testimony
Please stay tuned for additional budget-related updates, including all State Department Budget hearings in the Senate and Assembly, as I plan to keep everyone informed as the budget process continues. OLS and the State Treasurer will appear before both the Senate and Assembly budget committees again on May 14th and 15th, respectively to provide an additional revenue update after the April tax collections are in. The FY 2020 budget must be passed by the Legislature and signed by the Governor by July 1, 2019.