Updated revenue forecasts from the state Treasury this week now show New Jersey poised to open the 2022 fiscal year with a staggering $10 billion in budget reserves. As the deadline to finalize the FY22 State Budget nears, NJBIA is leading the call for policymakers to use the unprecedented surplus wisely.
“It’s really important that we use this influx of cash for one-time investments in our economy and to pay down debt where we can while not putting it toward recurring spending,” said NJBIA Vice President of Government Affairs Christopher Emigholz.
“We know there will be no tax increases this year, after years of tax increases on residents and businesses. But that should not just be an election-year special. If the state approaches this money prudently, by way of addressing critical economic needs, pro-growth investments and with the foresight of knowing we can’t keep spending away, we really should be avoiding tax increases for years to come.”
After borrowing more than $4 billion, with interest, last year to accommodate projected revenue losses that never came, the Murphy administration announced this past week another $4.1 billion in added FY21 tax revenue and $1.1 billion in increased FY22 projections – bringing the state’s total projected windfall of $5.2 billion over two fiscal years.
And that doesn’t include the more than $6 billion in COVID-19 relief funds recently provided to New Jersey via the federal American Rescue Plan Act.
Gov. Phil Murphy has proposed a nearly $45 billion FY22 budget – about a 30% increase from the budget signed by Gov. Chris Christie four years ago.
Emigholz said while election year temptations may be in place for legislators to serve their constituencies, it’s critical that the state follow some of the tenets of NJBIA’s guidance document “Navigating a Smooth Landing for Our State Budget and Economy,” which was released earlier this spring.
Among those recommendations are:
- Debt reduction (where possible and appropriate because the federal American Recue Plan funds have limits on that)
- Coordination and collaboration of all levels of government by a central point in Gov. Murphy’s office, working with legislative input, with the goal of avoiding redundant spending
- Spending that is focused only on non-recurring items that fill a current need
- A multi-year approach to spending to ensure that expenditures are not permanently recurring and avoid tax increases
- A focus on protecting and assisting those impacted by the pandemic, and not using funding to pay for new, unrelated programs
- Stimulation of the economy through pro-growth spending on workforce development, infrastructure and innovation
Emigholz said New Jersey’s greater windfall should further justify the need to direct funds to the New Jersey Unemployment Insurance (UI) Trust fund, to both reduce debt and a looming $1 billion automatic UI tax increase on jobs.
Also on the debt front, Emigholz said it’s encouraging there is talk of making a pension payment higher than the $6.4 billion pledged by the governor this year – New Jersey’s first pull pension payment in more than two decades.
“Since federal recovery funds can’t be used to pay down direct debt, lessening our pension burden is still a good thing to avoid future debt,” Emigholz said. “It won’t stimulate the economy as much as infrastructure, innovation or workforce development investments, but it does help with the state finances that need it.”
Emigholz added that a few well-placed investments to stimulate the economy, along with fiscal discipline, are the key to stopping future tax increases. NJBIA has recommended more funding for workforce development programs, as well as budget language and/or legislation that drives significant federal funds to the New Jersey Economic Development Authority for Main Street businesses.
Emigholz also reiterated what was said by NJBIA, and many others, prior to New Jersey unnecessarily borrowing more than $4 billion last September based on revenue concerns.
“It can’t be said that it’s Monday Morning Quarterbacking when we and others were warning about borrowing weeks before the game,” Emigholz said. “So we ended up needlessly borrowing $4.3 billion in non-callable bonds to increase the FY21 surplus from $5.8 billion to $10.1 billion. To have unnecessarily borrowed for what was not an emergency is a great disappointment for the state.”