With less than two weeks to go before the 2019 fiscal year, New Jersey Gov. Phil Murphy and state lawmakers remain far apart on a spending plan.
Murphy said Monday he would veto a budget proposal advocated by fellow Democrats who control the state legislature that would boost spending by $450 million.
Murphy said the plan contains nearly $1 billion of “unsustainable” revenue sources and would create a $164 million deficit.
The first-year governor has proposed a $37.4 billion budget that relies on $1.56 billion of new tax revenues while Senate President Steve Sweeney, D-Gloucester, and Assembly Speaker Craig Coughlin, D-Middlesex, support an alternative to establish a two-year surcharge on corporations earning $1 million or more in profits.
“What I have insisted upon throughout this process is an honest budget that puts New Jersey on a responsible course to a stronger and fairer future through sound and sustainable fiscal processes,” Murphy said at a press conference Monday. “I will not sign any budget based on any numbers that I do not believe are sound and sustainable.”
Murphy has proposed establishing a 10.75% income tax bracket for those earning more than $1 million and restoring the sales tax to its previous 7% level from 6.625%. He said his budget would close with a projected surplus of more than $740 million and includes a 15-year-low reliance on nonrecurring revenues.
The Democratic legislative proposal Murphy opposes would hike taxes for corporations earning between $1 million and $25 million to 11.5% from 9%, expiring after the 2020 fiscal year. Businesses above $25 million would pay a 13% rate for the two-year period. Sweeney said taking a cut from businesses that benefited from the new federal corporate tax cuts is a better strategy than a millionaire’s tax that would harm residents who now are limited in how much they can deduct from state and local taxes.
“The corporation business tax provides the necessary funding for the general fund to keep the budget in balance,” said Sweeney at press conference late Monday. “Committing to two years is not a gimmick or a one-shot. It gives the governor two years to start fixing the things that are wrong here.”
Sweeney and Coughlin said they plan to send a budget to Murphy’s desk by Thursday. The state faces a June 30 deadline to a second straight year of a government shutdown when the fiscal year begins July 1.
Last year's shutdown came under Republican Gov. Chris Christie. The state experienced 11 bond rating downgrades under Christie, driven largely by rising pension liabilities. The state’s general obligation bonds are now the second-lowest rated among U.S. states at A-minus from S&P Global Ratings, A3 from Moody’s Investors Service and A from Fitch Ratings and Kroll Bond Rating Agency.
“When you build a financial house of cards year after year and see it fall year after year at some point you have to realize that the same old way of doing business in Trenton isn’t working,” said Murphy. “A budget for the sake of a budget to kick the can to July 1 will not have my name on it.”