The New Jersey Treasury Department and the Office of Legislative Services are nearly $1.4 billion apart in determining how the novel coronavirus pandemic will affect state revenues.
Figures provided by the OLS indicate New Jersey will receive $1.37 billion dollars more than projected by the Treasury Department.
The divide prompted questions from Democrats and Republicans at the Senate Budget and Appropriations Committee hearing held Tuesday.
“This is the first time I have seen a delta of this magnitude,” said Chairman Paul Sarlo, D- Wood-Ridge, to Frank Haines, the legislative budget and finance officer. “We’ve seen it a lot more under the Christie administration. This is the first delta that we’ve actually seen between your agency and Murphy’s treasury department.”
Murphy’s proposed $32.4 billion budget includes $4 billion in borrowing from the federal government and a $2.2 billion surplus
Sarlo asked Haines if borrowing or drawing on surplus was worse.
“I don’t think it’s wrong in a state of emergency to rely on the power to borrow to deal with that emergency and also improve what your fiscal condition is,” Haines said. “I think we need prudence here. We need prudence. There should be really searching thought, probing given before you lock into decisions.”
A five percent surplus is a “laudable goal” and is good for the future if it can be preserved.
Republicans said the additional revenues predicted by the OLS and cutting some programs in Murphy’s budget could eliminate the need to borrow.
Senate Republican Budget Officer Steven Oroho and Sens. Sam Thompson Declan O’Scanlon and Michael Testa are proposing an alternate budget that removes spending that is not COVID-related – including a proposed $1,000 bond for each baby born in New Jersey – adjusts the budget prefunding, and builds “the state surplus to a responsible level.”
“Our internal analysis, which was advised by former state treasurers and revenue professionals from both parties, suggests the Murphy administration is lowballing revenues for next year by around $2 billion,” Thompson said in a statement. “It’s clear the governor is severely understating state revenues to convince people that he needs to borrow to massively increase spending on new non-COVID programs, and to pass an income tax increase that’s more about liberal politics than good public policy or necessity.”
State Treasurer Elizabeth Maher Muoio said in her testimony that New Jersey is facing a $6.5 billion budget deficit, and gross income taxes and corporation business taxes will continue to plummet.
“Taxpayers are signaling how they view their income prospects in tax year 2020, and the warning light is blinking red,” she testified.
Murphy has included two taxes on businesses and individuals that make over $1 million. A proposed tax on qualified business income for anyone who makes more than $1 million annually would generate $75 million in the fiscal 2021 budget, according to figures provided by Maher Muoio. A 2.5 percent surtax on businesses that earn more than $1 million in the 2020 tax year would bring in about $210 million.
“We are looking to ask corporations and individuals who have recovered and are still succeeding and making over a million dollars in this economy to pay a little bit more to help New Jersey survive and be in a better position coming out of this pandemic,” Maher Muoio said.
If the millionaire’s tax is removed from the budget, another revenue source will be needed, Maher Muoio said.
The Assembly Budget Committee will hear from Maher Muoio and the OLS on Wednesday and will hold a hearing with the Department of Human Services. Hearing will continue through Sept. 15 before negotiations begin on the budget, which is to take effect Oct. 1.
