Gov. Murphy’s Budget. Part I: His Transition Advisory Committee smart recommendations

Budget cover March 2017

Governor Phil Murphy will present his first state budget proposal on Tuesday, March 13, in his address to the legislature. The current budget runs through June 30, 2018. Murphy now has the opportunity to tweak the remaining four months of the current budget and propose new plans for next year’s budget. It should be a breath of fresh air. His Budget Transition Committee has made sound proposals. He will likely touch on most of these proposals, but due to his concern over a major deficit in the current budget and future strains on the budget, he will be limited in the dollar-amounts he can commit at this early stage.


In spite of opposition from Senate President Steve Sweeney and state Assembly Speaker Craig Coughlin Murphy on Thursday doubled down on his promise to institute a millionaire’s tax surcharge. The breaking news yesterday was Speaker Sweeney’s alternative proposal to get the money needed by enacting a corporate tax surcharge increase of 3% on businesses. It seems to make sense as it puts the hammer on corporations which get a lower tax rate in Trump’s new tax law – the same law that limits the state and local taxes residents can deduct.

Gordon MacInnes, NJ Policy Prespective President, replies, “Senate President Sweeney’s proposal is a sensible step to recoup some of the windfall that profitable corporations will get from the new federal tax law. But let’s be clear: by itself it will not produce enough new revenue to invest in New Jersey’s neglected assets and put the state back on the path to prosperity. It is, in short, a welcome first step.”


“For decades, NJ was a shining example of fiscal prudence. During the 1990s, as the economic growth lagged, NJ policymakers departed from this stable financial course. This resulted in eleven credit downgrades in the past eight years. Today, NJ’s appropriation credit stands two downgrades away from junk bond status. The state’s massive pension obligation is a major reason for these downgrades but insufficient revenues, other debts, and increasing costs are fueling further economic instability. Under Governor Christie’s administration, the state’s structural deficits have stayed high.

Budgeting pressures will continue to make it challenging to fund all of the known budget commitments and emerging funding needs from existing resources. A budget must be crafted that absorbs the increasing pension and debt service costs, investments in mass transit and transportation infrastructure, additional funding to support K-12 and higher education, and the devastating impact from the actions taken by the Trump Administration on the most vulnerable residents – the poor, the sick, the disabled, and the homeless.

I. Priority: Generate adequate revenue

  • Legalize sale of cannabis.
  • Close Corporate Business Tax loopholes.
  • Raise the marginal tax rate on those earning over $1 million (while monitoring outmigration of high-income taxpayers).
  • Work with NJ’s congressional delegation to change Federal laws that prohibit the states from capturing sales tax on some of the ecommerce activity.
  • Partner with other states to limit the carried interest loophole.

II. Priority: Make government more efficient

  • Take a technology-based multi-agency enterprise approach to the way it handles delivering services to its residents.…
  • Remove unnecessary requirements for occupational licenses on certain professions.
  • Improve State’s allocation of federal funds by tapping into available grants for the State agencies and hiring federally-funded State government employees.

III. Priority: Address the underfunding of the public pension system

  • Revisit the current pension payment plan to ensure it is robust enough to stabilize public pension system.
  • Reduce expenditures on high-fee outside pension managers.

IV. Priority: Create a culture of fiscal responsibility

  • Revive/reconstitute the Governor’s Council of Economic Advisors to monitor interactions between the economy and the state finances.
  • Mandate better reporting on outcomes from EDA subsidies and improve evaluation.
  • Produce multi-year financial plans, complete with debt affordability analysis.
  • Institute requirements for development and maintenance of the state’s rainy-day fund (stabilization funds).”

Full text (11 pages) Report of the Budget Transition Advisory Committee. Co-Chairs: Dr. Henry Coleman, Amy Mansue, John McCormac and David J. Rosen (former Legislative Budget and Finance Officer). Rosen is the one most familiar with NJ budgets. Christie called him “Dr. Kervorkian” because of the numerous times Rosen found Christie’s budgets wanting.

Part II in this series: NJ Policy Perspective recommendations.

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