NJ Governor Proposes Budget That Boosts School, Transit Aid

New Jersey Democratic Gov. Phil Murphy on Tuesday proposed a $40.9 billion budget for fiscal year 2021, boosting overall spending over last year's plan by more than 5% and including tax hikes on incomes over $1 million and higher spending on schools, transit and the public pension.

Murphy, a first-term former Goldman Sachs executive and Obama administration official who campaigned as a self-styled “pro-growth progressive,” delivered his third budget address before a joint session of the Democrat-led Legislature.

He leaned into the progressive label, even quoting Franklin Roosevelt, but he also grappled with Republican and even some Democratic criticism he has already gotten and will likely receive again during next year's gubernatorial election over the state's high property tax rates.

The budget proposes a boost in aid to schools of $465 million, or nearly 5% over last year, from roughly $10 billion to an estimated $10.5 billion. Education aid takes pressure off local governments and boards of education, which levy property taxes, the governor argued.

“It bears repeating – school funding is property tax relief. It is the most aggressive way we can attack the single-largest root-cause of our high property taxes,” Murphy said in the more than hourlong speech.

Republicans sounded unconvinced.

“It is clear that he has settled comfortably into accepting that New Jersey will always be unaffordable,” said GOP state party chairman Doug Steinhardt.

The speech had few big surprises, but there were new items.

He is seeking to boost the state's cigarette tax from $2.70 a pack to $4.35, which would be among the highest in the country; he revealed that there would be no fare hike for a third straight year at New Jersey Transit under his plan; he wants to set aside $80 million to begin dealing with lead drinking water pipes; he is seeking $30 million for a community college grant program that would provide free tuition to about 9,500 students whose families earn $65,000 or less; and he wants $50 million set aside to expand tuition-free college for the first two years at public colleges and universities; the budget also would exempt combat pay earned by active-duty military service people for the first time.

Unlike previous budgets, Murphy is not seeking to raise the sales tax from 6.625% to 7%. The proposal also includes $174 million in savings in state employee health benefits, as well as $392 million in lower spending for state government departments.

Beyond the school funding, other big-ticket items include New Jersey Transit, which saw its subsidy from the state's general fund fall to as low as $33 million under Christie in fiscal year 2016. The general fund subsidy would climb to $590 million under Murphy's 2021 proposal. That's an increase of nearly 30% over last year's general fund subsidy.

The public pension payment would rise from more than $4 billion in the current fiscal year to more than $4.6 billion under Murphy's proposal.

As he has in the last two budget proposals, Murphy is calling on lawmakers to boost marginal tax rates on incomes over $1 million from 8.97% to 10.75%. The change is estimated to bring in about $500 million to the Treasury. Lawmakers have balked at it.

Senate President Steve Sweeney, though, says he would consider the increase if Murphy can find $1 billion more for the state pension. In his speech, Murphy thanked Sweeney for his willingness to consider the higher tax rates.

Assembly Speaker Craig Coughlin called the budget an encouraging first step, but said he was cautious about raising taxes.

He received a lengthy standing ovation at the start of the speech, one of his first public events since announcing over the weekend doctors have found a likely cancerous growth on his liver, which will be removed next month. He said he had heard words of encouragement from across the state.