Murphy unveils $40B budget, seeks tax hikes, some cuts, more debt

New Jersey Gov. Phil Murphy (Edwin J. Torres/Governor’s Office)

New Jersey Gov. Phil Murphy proposed a nearly $40.1 billion budget, which slashes about $1 billion in spending but also calls for higher taxes on millionaires and $4 billion in new debt to close gaps stemming from the coronavirus pandemic.

Standing on a podium Tuesday at midfield at Rutgers' SHI Stadium in Piscataway to make social distancing easier than inside the confines of the statehouse, Murphy unveiled his second fiscal 2021 budget of the year.

The earlier, nearly $41 billion plan was scrapped because of the pandemic, which has killed more than 14,000 people in the state and resulted in about 190,000 positive cases.

Murphy recalled the earlier proposal with some nostalgia.

“There was no social distancing and not a face mask in sight. My how things have changed,” he said.

The administration faces a nearly $5 billion shortfall in revenues compared with the earlier budget, state Treasurer Elizabeth Muoio said.

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To close the gap, the governor is proposing a number of changes. Among them are higher tax rates on income over $1 million, from 8.97% to 10.75%. He's also proposing making permanent a 2.5% increase on the state's business tax that was slated to expire in 2022.

Among the cuts he's putting forward are estimated reductions in state Medicaid costs, though details are murky.

On the spending side, K-12 school aid would be flat compared with last year at $8.7 billion. The public pension payment would rise, according to a formula agreed under former Republican Gov. Chris Christie to $4.9 billion from $3.7 billion.

The unusual August budget speech came as a result of the COVID-19 outbreak.

Murphy, a Democrat, and lawmakers agreed on legislation to extend the current fiscal year from June 30 to Sept. 30. That law requires the governor to offer a new spending plan, which he unveiled Tuesday.

Murphy has long sought a so-called millionaires tax, but has been rebuffed by lawmakers.

Senate President Steve Sweeney, a fellow Democrat, didn't rule out any of the governor's proposals.

“It would be very irresponsible to say anything is off the table," he said in an interview.

Murphy only recently got the ability to take on more debt after winning a victory in an unprecedented case before the state Supreme Court. The state GOP challenged the governor over a recently enacted law that authorized him to borrow up to $9.9 billion because of the coronavirus hit to state finances.