Updated: 2:50 p.m.
New Jersey Gov. Phil Murphy on Tuesday proposed a new $32 billion budget that revised the state’s financial plan in light of the economic turmoil caused by the coronavirus pandemic.
The “new future” Murphy laid out included a mix of spending cuts, new taxes, and a record-high borrowing request to the legislature. He said it was a recognition of the need for belt-tightening as well as an investment in the state’s recovery from the COVID-19 outbreak, which has sickened nearly 190,000 New Jerseyans.
“We must have the unavoidable conversation about what it means to not only see our state through this emergency but what we will look like when we emerge from it,” he said.
The nine-month spending plan will fund the state from October through June of next year. A previous three-month stopgap budget coming in at $7.6 billion covers expenses through September.
On February 25th, six months ago today, I stood in a crowded Assembly Chamber to lay out my vision for the next state budget. There was no social distancing and not a face mask in sight.
— Governor Phil Murphy (@GovMurphy) August 25, 2020
Under the plan, the administration would cut $1.25 billion in state spending across departments. But it would also raise new revenue by borrowing $4 billion and increasing taxes, including a higher income tax rate on millionaires and a hike in the cigarette tax.
The so-called millionaire’s tax would go from 8.97% to 10.75%. Murphy says raising that rate would generate $390 million more for the state. The borrowing was scaled back. Previously Murphy said he might need to borrow as much as $9.9 billion. Earlier this month the state Supreme Court ruled he could borrow to help plug a hole in the budget, but that his team would have to certify that revenues were still low enough to make it necessary.
Murphy said the state would maintain core services, keep K-12 school aid stable, and even make its projected payment into the public pension system. The budget would also send funding to programs to modernize drinking water infrastructure, increase affordable housing, and bulk up the state’s early voting system.
One novel proposal in Murphy’s budget was an initiative to provide “baby bonds” to New Jerseyans born in 2021 into families making less than 500% of the federal poverty level, or $131,000 per year for a family of four.
The state would deposit $1,000 for each of those estimated 72,000 babies, who could withdraw the money when they turn 18 to be used toward “wealth-generating activities” like buying a house or paying for college.
The idea is based on a similar proposal floated by New Jersey U.S. Sen. Cory Booker at the federal level.
It was not immediately clear if Democrats in the legislature would support Murphy’s tax hike on millionaires, something they have resisted in recent years, despite supporting the idea back when Chris Christie was governor.
“We will keep an open mind as we understand every option and proposal must be thoroughly reviewed and vetted,” said Assembly Speaker Craig Coughlin (D-Middlesex). “All options are on the table.”
Republicans and business groups, on the other hand, slammed Murphy’s proposal, saying that now was not the time to raise taxes on residents who are financially struggling because of the ongoing pandemic.
“Businesses across the state have been economically decimated and many are still waiting for clarity as to when they can reopen. They are struggling to stay afloat and keep their employees on payroll,” said New Jersey Chamber of Commerce President Tom Bracken. “For the governor to propose new taxes in this environment is cruel and irresponsible.”
Murphy also used the speech to call on President Donald Trump and U.S. Senate Majority Mitch McConnell to provide states like New Jersey with more federal cash assistance to dig out of the financial morass.
The legislature will now hold hearings on Murphy’s new budget proposal.
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