A new numbers game.

Byline: Jessica Perry

Gov. Phil Murphy's first budget last year nearly caused a government shutdown and left many in Trenton bruised and bloodied. In contrast, the launch of Murphy's second budget, which the governor unveiled on March 5, was relatively smooth.

The Democratic governor called for $38.6 billion in spending during fiscal year 2020, which starts in July, along with myriad savings that he insisted will limit the need for new revenues. The budget that lawmakers and Murphy adopted last year included $1.5 billion in increased revenue.

"This budget is how we make real the promise of a stronger and fairer state that works for every family. And, it builds on the progress we have already made," Murphy said during his budget address.

While the response from Democrats who control the legislature was generally positive, Murphy's renewed call for a tax on high-income earners drew criticism from the statehouse and from business advocates. Progressive groups praised the blueprint as a move toward equality and representatives of the cannabis industry expressed optimism about the prospects of adult use legalization, given that the budget includes revenue from taxes on recreational marijuana. The budget now faces months of debate with public employee benefit reform likely to remain a contentious point before the fiscal year ends on June 30. This year, though, lawmakers seem confident that the threat of a shutdown has receded.

A better start

Senate President Stephen Sweeney, D-3rd District, one of the most powerful elected officials in the state, credited Murphy for "starting off this budget year a lot differently than last year."

"It was a rough start on both sides, but this is a positive step forward," Sweeney said at a news conference immediately after the Tuesday afternoon budget presentation.

He was flanked by many of the lawmakers who will determine whether Murphy can enact the priorities outlined in the budget. The group included Assembly Speaker Craig Coughlin, D-19th District; Assembly Budget Chair Eliana Pintor Marin, D-29th District; and Senate Budget Chair Paul Sarlo, D-36th District.

Democratic lawmakers, whose support Murphy needs, reacted favorably to the governor's proposed $1.1 billion in savings. Murphy's proposed spending level is three percent higher than the 2019 budget he signed last July.

"It was optimistic and upbeat, which I think is a change about the future of our state," Senate Majority Leader Loretta Weinberg, D-37th District, told reporters. "It was a hand to the Legislature, from the governor, 'I am willing to work with you.'"

On the other hand, Murphy's proposed millionaire's tax a rate increase from 8.97 percent to 10.75 percent for those earning more than $1 million was pronounced a non-starter, with lawmakers including Sweeney and Coughlin saying they would not support the measure.

"I believe the governor's proposal is an encouraging first step," Coughlin said. "However, I remain convinced that we can achieve added substantial savings through reforms and that our fiscal solutions should not include any broad-based tax increase, including sales and income tax."

Running a surplus

The total savings number includes $800 million in reduced health care costs, attributable in part to $200 million in savings from a new contract with several state employee unions, including the Communication Workers of America. Other proposed health care savings include member-eligibility audits to make sure everyone enrolled in the state health plan is actually eligible to participate, as well as engaging a third-party administrator who would independently scrutinize medical claims in real time.

Murphy's budget also counts on the state rebidding its health care contracts to third-party administrators, likely Horizon Blue Cross and Blue Shield of New Jersey, Aetna and Optum.

These plans were among the recommendations laid out by the Plan Design Committees, which oversee the state and school employee health plans.

"In total, our budget contains roughly $800 million in real and lasting savings in the delivery of public employee health care in the coming fiscal year a 16 percent year-over-year decrease from the current budget," Murphy said.

The budget projects $16.7 billion in revenue from the gross income tax, $10.5 billion from the sales tax and $3.2 billion from the corporate business tax. All told, the spending blueprint would produce a yearend surplus of $1.16 billion.

New Jersey is expected to end the current fiscal year with a $1 billion surplus, even though the government missed its revenue targets. The state lowered its estimates for income tax collections by $415 million to $15.6 billion and sales tax revenue by $79 million to $10 billion.

"This budget will grow our surplus even more in Fiscal 2020, to nearly $1.2 billion," Murphy said. "One-shot revenues are down to only 1.7 percent, a decrease of one-third over the current budget, and half the average yearly amount across the prior administration."

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