New Jersey revenue bump results in release of frozen funds

A tax collection surge in the first half of 2020 led the New Jersey Department of Treasury to release remaining funds Gov. Phil Murphy’s administration had held in reserve since July.

State Treasurer Elizabeth Maher Muoio announced Thursday the release of $121 million that had remained in reserve from a Murphy executive order because of concerns about projected revenues for his $38.7 billion 2020 fiscal year budget. Muoio noted that robust revenues were realized from July through November before collections began to moderate in December.

(c) 2012 Ed Livernoche

“Based on the latest revenue numbers, we currently anticipate we will be able to meet our targeted fund balance pursuant to the Governor’s Executive Order,” Muoio said in a statement. “While there is always the risk of a future downturn, we are comfortable that we can maintain this surplus level throughout the remainder of FY 2020.”

The Murphy administration previously released nearly half of the $235 million total frozen funding in October, including $53.7 million of $104.8 million in transitional aid allocated for some of New Jersey’s distressed municipalities. Moody’s Investors Service noted in an Oct. 31 report that the suspended transitional aid created a potential strain for municipalities who rely on the funding for budgeting. The cities of Paterson and Union City would have been most negatively impacted by a loss of transitional aid, according to Moody’s.

The unfrozen funds also include $4.6 million for Stockton University’s new satellite campus in Atlantic City that first opened in September 2018. The college is planning to use funds for phase II of its Atlantic City plans to build a 400-bed residence hall.

“Stockton’s Atlantic City campus is extremely successful, and the $4.61 million released today represents a crucial component of our future expansion plans and will keep Stockton accessible and affordable to New Jersey students,” Stockton president Harvey Kesselman said in a statement.

Some lawmakers had objected to Murphy’s executive order, arguing that they used appropriate revenue estimates when crafting an appropriations bill just before the June 30, 2019 budget deadline. The governor is expected to face another budget battle with fellow Democrats who control the state legislature as he pushes for a "millionaire’s tax" they rejected the last two years.

“We always knew these funds would eventually be released but they should never have been frozen in the first place and the people served by the programs should not have been forced to wait for six long months for the services they need,” Senate President Steve Sweeney, D-Gloucester, said in a statement. “It is unconscionable that they were held hostage to a politically motivated executive order that was illegitimate and unconstitutional.”

New Jersey’s combined collections for major taxes totaled $2.969 billion last month, a slight 0.1% or $4.4 million dip from December 2018. Muoio noted that December is typically the largest revenue collection month for the first half of the fiscal year and that the decline is in line with Treasury’s expectations that strong early 2020 growth will not continue during the remaining months. Year-to-date collections have totaled $13.887 billion, up 7.6% or $986.4 million, above the same six month period last year.

Muoio cautioned the state would likely not keep pace with current revenue growth through June 30 partly because of a drop in the top-ended business tax rate that went into effect Jan. 1. Treasury officials also noted that there could be a large number of tax appeals while corporations grapple with federal tax changes signed into law by President Trump in December 2017.