New Jersey tax revenue is up slightly, state treasury officials reported Tuesday, a change trumpeted by Democrats as a sign of fiscal responsibility as Republicans warned the state is headed toward a fiscal cliff and can’t sustain Gov. Phil Murphy’s long-term budget goals.
At the same time, the head of the state Senate Budget Committee floated the idea of raising the state sales tax to 7% rather than passing tax hikes on corporations that Murphy proposed to fund a cash-strapped NJ Transit.
State Treasurer Elizabeth Muoio’s appearance before the Senate committee at the Statehouse in Trenton is one of the big early moments in state budget negotiations, which will speed up in the coming weeks.
In February, Murphy unveiled a $55.9 billion budget proposal for how the state government will spend taxpayer money in the upcoming fiscal year. The Democratic governor and leaders of the Democratic-controlled state Legislature now have until June 30 to agree on a final plan.
This year, the big fight is expected to be over Murphy’s proposal for a new tax on corporations to help provide continual funding for NJ Transit. Lawmakers, meanwhile, are seeking more property-tax relief.
That includes more money for the Stay NJ program, which is designed to cut seniors’ property taxes in half, starting in 2026, but needs to hit several thresholds to be funded. State Assembly Speaker Craig Coughlin, D-Middlesex, the main sponsor of the law, is one of the primary legislators who negotiate the budget with the governor.
Muoio predicted the state is expected to see $54.3 billion in tax revenue through the end of this fiscal year that ends in June — which would be about $140.2 million more than earlier projections. She said this was welcome news after the “revenue roller-coaster” that followed the coronavirus pandemic.
The state Office of Legislative Services, which acts as a third-party nonpartisan monitor, had estimates that were only slightly different than state Department of Treasury numbers.
The office also stood by its previous analysis that New Jersey’s surplus would be nearly depleted if spending continues at the current pace by 2027.
Sen. Paul Sarlo, D-Bergen, who chairs the budget committee, suggested looking into raising the state’s 6.625% sales tax to 7% instead of Murphy’s proposed 2.5% business surcharge to help fund NJ Transit, which has been strongly opposed by the business community.
Sources told NJ Advance Media in January that Murphy’s administration revived the idea of putting it back at 7% during talks with lawmakers earlier this year, though that didn’t make it into the governor’s latest budget proposal in February.
On Tuesday, Sarlo said going back to 7% “would be more stable than the corporation business tax on the higher earning income companies, which could vary from year to year.”
Sarlo offered praise to Treasury officials and suggested that a variety of tax relief programs be combined under Stay NJ. Coughlin has threatened to hold up the tax on large corporations to make sure Stay NJ remains on track.
Republicans say the program asks for an amount of money that’s currently not being generated by the state — a situation that will fall on the next governor and not the current one.
Republican Budget Officer Declan O’ Scanlon, R-Monmouth, likened the overall budget dynamic to a “house of cards in an earthquake.”
New Jersey Policy Perspective released a statement after the hearing also expressing concern for future projections.
“Beyond the “who pays” question on CTF vs. sales tax, we’re very concerned about the nearly $2 billion shortfall, even with the CTF (corporate transit fee) built into the governor’s proposed budget, and how the state will need more revenue moving forward to balance the budget,” said budget analyst Peter Chen.
Sen. Mike Testa, R-Cumberland, sparred with Treasury officials over previous reporting by Bloomberg that the state’s health plan paid more to hospitals than what they charged.
Treasury officials said the confidentiality of the settlement discussions prevented them from providing info on most of what he asked for, which frustrated Testa.
“I think Treasury owes it at least to us even if we signed confidentiality agreements, to at least have some level of knowledge of what’s happening with the Department of Treasury and these alleged overpayments,” he said.
Republicans, the minority party in the Legislature, also asked about incoming special line items from Murphy’s office and Democrats, which are in known in Trenton as “Christmas tree items.”
The practice usually results in last-minute additions to the budget by Democrats.
“We’ve got to get to the bottom of that,” O’Scanlon said.
Stories by Jelani Gibson
NJ Advance Media staff writer Brent Johnson contributed to this report.
Jelani Gibson is a cannabis and politics reporter for NJ.com. He can be reached at jgibson@njadvancemedia.com. Follow him on X @jelanigibson1 and on LinkedIn.