Republican members of the state Senate budget committee announced a resolution that includes a detailed plan for spending an estimated $9 billion in unexpected tax revenue and more than $3 billion in federal coronavirus relief money that remains unallocated.
“We’re leading the way in showing Gov. Murphy and the Democrat legislative majorities how to give back billions to taxpayers while building a responsible surplus and paying down substantial additional debt,” Sen. Declan O’Scanlon, R- Monmouth, the chamber’s Republican budget officer, said in a statement released Thursday. “It’s no surprise that everyone else is suddenly rushing to find ways to ‘Give It Back’ as Senate Republicans have advocated for months.”
New Jersey Treasurer Elizabeth Muoio told lawmakers last week that the state now expects to collect over $9 billion more than initial estimates from the Murphy administration last summer, leaving state lawmakers about a month to figure out what to do with all the extra money.
The Republican plan combines and strengthens several GOP proposals announced in recent months and includes $8 billion in tax relief, a $5 billion surplus, more than $3 billion to pay down debt. It also calls for increased legislative oversight for more than $3 billion in unspent American Rescue Plan funding.
Senate Republican Leader Steven Oroho said the state is facing an unprecedented situation “where families are struggling to pay their bills amid the highest inflation in a generation while the state is simultaneously bringing in record tax collections that are billions beyond expectations.”
“Our ‘Give It Back’ rebates would help address this imbalance by returning $1,500 in direct tax relief to most New Jersey families immediately,” Oroho said in a statement. “We’ve also proposed substantial increases in property tax relief, tax cuts for families, seniors, and veterans, stopping pending toll hikes on drivers, and ending an unnecessary tax surcharge on businesses early.”
Tax Relief
Republicans, through their “Give it Back” initiative proposed in early March, want to return $4.5 billion to New Jersey taxpayers through $1,000 and $500 direct rebates.
Under the main bill in their initiative, taxpayers with gross income of $500,000 or less would receive a $1,000 credit if married filing jointly, and individuals would receive a $500 credit. A second bill, the “Gas Price and Inflation Tax Credit Act,” would provide an additional $500 refundable income tax credit to families with income less than $250,000.
The proposal announced Thursday also includes $1 billion for property tax relief and nearly $3 billion to replenish New Jersey’s Unemployment Insurance Trust Fund, eliminate the 2.5 percent corporate surtax early and halt automatic toll increases, among other items.
A linchpin of Murphy’s spending proposal is his new property tax relief program that is meant to restructure the Homestead Rebate. It would provide property tax relief to renters and extend rebates to homeowners making up to $250,000, and the state investment would swell to $1.5 billion annually, bringing the average rebate per eligible household to $1,150 by 2025.
Republicans have criticized the governor’s initiative, saying it would take too long to provide relief and “would actually reduce rebates for hundreds of thousands of renters and homeowners.”
Prepare for the Next Recession
Republicans, in their budget plan, want to boost the state surplus to more than $5 billion, which is significantly less than proposals from the Murphy administration and Senate Budget Chairman Paul Sarlo, D- Bergen.
Experts have warned of a possible recession on the horizon and say state lawmakers should use caution as they negotiate state budgets this year, warnings echoed by Treasurer Muoio and the state’s nonpartisan budget analysts.
Muoio said the Murphy administration wants to boost the budget surplus to more than $6 billion, and Sarlo recently said the surplus should be more than $7 billion or higher.
The Republican plan includes $3.1 billion to pay down debt, nearly twice the amount proposed by Murphy in his spending plan. They also said they want to repatriate income taxes unfairly collected by New York and focus one-time revenues on funding nonrecurring pay-as-you-go capital construction projects.
Sen. Sam Thompson, R- Middlesex, said much of the state’s current windfall is nonrecurring, “which would make it irresponsible for anyone to propose substantial permanent spending increases that we won’t be able to support when the next recession comes.”
“Our plan ensures that New Jersey is prepared for the next downturn by establishing a healthy $5 billion surplus that amounts to 10 percent of the budget, while making substantial investments in critical infrastructure, including to fix broken computer systems at unemployment and the MVC,” Thompson said in a statement.
“Given the current financial challenges many families are facing due to high gas prices and inflation, we’ve proposed temporary school aid restorations to prevent property tax hikes in nearly 200 districts that could devastate household budgets.”
Control of Federal Coronavirus Aid
The Republican budget plan includes a proposal to give the full state Legislature a say in spending more than $3 billion in unallocated federal aid, a portion of the $6.2 billion New Jersey received last year through President Joe Biden’s American Rescue Plan.
Murphy and lawmakers agreed last year that the Legislature’s Joint Budget Oversight Committee would have to approve the use of those funds. It was included in language in the bill for the current state budget, which expires June 30.
However, that language is absent from Murphy’s new spending proposal for the fiscal year that begins July 1, effectively removing the Legislature’s oversight. The move caught state lawmakers by surprise and prompted concerns from both Democrats and Republicans during recent departmental budget hearings.
Several legislative leaders, including state Senate President Nicholas Scutari, said the issue is non-negotiable and legislative oversight must be restored before a final budget is passed.
“The Legislature will have a say in the disbursement of the COVID funds or we will not have a budget,” Scutari, D- Union, told NJ Advance Media. “I believe the governor understands that. And that’s a non-negotiable item.”
Senate Republican spokesman Brad Schnure said Democrats will likely get the Joint Budget Committee oversight restored. But that doesn’t go far enough, he said, adding that JBOC is too secretive and excludes rank and file members from vetting proposals or participating in the approval process.
Republican lawmakers said they also want to close loopholes in the state’s debt reduction and avoidance fund “that allows for new capital spending that is not authorized under both the constitution and existing statutory debt authorizations.” They want the full Legislature to have a say in the use of those funds as well.
State Sen. Michael Testa, R- Cumberland, said the Republican plan “is completely transparent and would increase public input significantly.”
“If we don’t impose strict legislative oversight and discipline to effectively utilize the state’s $11 billion windfall, the Murphy administration is sure to make last year’s ‘orgy of pork’ look tame,” Testa said in a statement. “There’s absolutely nothing in our proposal that any leader of conscience should oppose.”
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