Budget Battle: Republicans Take on the Murphy Administration

Did Governor Murphy over-estimate the economic impact and recession the pandemic would have on New Jersey?  As the state sees a potential budget surplus, thanks to federal funds and borrowing, and an economy recovering faster than anticipated, Republicans took the opportunity to assail the governor.  At today’s Senate Budget hearings, the administration defended its actions, citing the fact that the pandemic—which has not yet been defeated—presented an unprecedented situation with no examples to follow and that it was better to be prepared than unprepared.

“Under the cover of the pandemic,” Republican Senator Sam Thompson said, “Governor Murphy pressured Democrats in the Legislature to pass tax increases, sold the Supreme Court on a $9.9 billion borrowing plan, and pled for billions more from the federal government.  To say that the governor exaggerated the impact of the pandemic would be an understatement of epic proportions.”

State Treasurer Elizabeth Muoio led the Senate through a fiscal history of the pandemic.  “When Governor Murphy took office in January 2018, New Jersey faced many fiscal challenges and we had made steady progress in addressing those challenges up to and including the introduction of the FY21 budget last February. Working together, we had continued meeting the required annual 10% ramp-up in our pension payment, an obligation which was, and is, famously onerous thanks to decisions by both parties over the past two decades to neglect or ignore the required actuarial payment. We had begun to build up our woefully underfunded surplus, which we had inherited at just over 1%. We instituted reforms yielding hundreds of millions of dollars in health benefit savings; took measures to control debt costs; significantly reduced our reliance on ‘one-shot’ non-recurring revenues; and made unprecedented investments in education and New Jersey Transit.  In February 25th of last year, the Governor presented his FY21 budget to the Legislature. The budget message was bold and optimistic. Twelve days later, the Governor declared a Public Health Emergency and we found ourselves in an uncertain and bleak economic reality with a proposed budget that essentially wasn’t worth the paper it was printed on.”

Muoio said that “somewhat interrelated” factors contributed to New Jersey’s fairer prospects that originally anticipated.  Among them, the federal stimulus of 2020 which Muoio said was more robust than the Great Recession response, where NJ unemployed residents received approximately $16B in “enhanced” unemployment benefits, stimulus checks for all residents, and businesses who benefited from $23 billion in the Paycheck Protection Program loans.  She said that economic closures were “eased sooner than most forecasted last summer” and as many more severe restrictions were avoided, businesses could operate better.  Muoio said that sales tax and realty transfer fees collections “actually grew” at the end of 2020 and working from home helped sustain the economy in various sectors.  She also said that the economy’s recovery was being helped by the “rapid progress” in vaccine development and distribution.

Nevertheless, Muoio said that lower earners in the state continued to struggle and those with incomes under $27,000 remained 28% below their pre-pandemic earning levels.  At the same time, the stock market “soared” in the latter half of 2020 and wage withholding collections had grown, with personal income estimated to have grown by 6.1%.  She attributed the apparent strong rebound compared to the slogging Great Recession to governmental intervention.

“Direct federal stimulus in 2020 provided New Jersey households with a total of roughly $10.2 billion through two rounds of stimulus checks and $16.1 billion in supplemental unemployment assistance. Additionally, the ARP is delivering an estimated $9.6 billion in direct stimulus payments to New Jersey taxpayers,” Muoio said.  “Federal supplemental unemployment benefits are now extended into September and could provide individuals with more than $8.0 billion, depending on actual unemployment levels and eligibility. Had the ARP not been enacted, we might have begun to see the impact on consumer spending fade sooner than we now expect in FY22.   Instead, these direct infusions should help maintain the current positive trends.  The State is also slated to receive a total of $6.6 billion under the new ARP plan – $6.4 billion through the State Fiscal Recovery Fund and roughly $190 million through the Coronavirus Capital Projects Fund.  We are grateful for the federal assistance we’ve received to date and the additional aid we’ll be receiving soon.  People are still clearly struggling. Unemployment in late March was at 7.8%, roughly double what it was prior to the start of the pandemic, and we have still yet to recover roughly half the jobs that were lost last spring.  Continued federal assistance will be crucial in helping us weather this crisis, particularly in avoiding the mistakes of the past.  We saw how long it took New Jersey to emerge from the Great Recession when state government chose to cut its way out of an economic crisis at a time when the demand for critical services skyrocketed.”

Muoio said that most economists, including former Fed chairman Ben Bernanke and Jerome Powell were in agreement with their strategy of investment.  “They’ve gone so far as to say it’s better to invest too much than too little during this precarious time.  So we are making critical investments in the people and programs who need it most, to get the state back on its feet and build a more resilient post-COVID future for New Jersey.”

There is the saying, “the ends justify the means” and it is on this principal that Republicans took the opportunity to slam the governor, an executive accused by members of both parties of ruling by edict since the pandemic began.

Senator Steve Oroho said, “It’s my hope that we don’t give the Murphy administration another free pass like they got with the current budget. We simply can’t afford it.  During the pandemic, the Murphy administration has not been transparent about our state’s finances, they haven’t used the billions of federal relief or State surplus funds at their disposal to help people, and they’re setting New Jersey up for major tax increases a year from now.”

The Republican senator said that the administration had peddled “outrageous claims” concerning state finances and was able to do so without “significant oversight” coming from the state legislature.  “The governor said we were at risk of being $10 billion, $20 billion, even $30 billion in the red.   The administration used those sky-is-falling claims to sell the state Supreme Court on a $9.9 billion borrowing plan that wasn’t needed.  Republicans warned last fall that there was no emergency need to borrow, that the governor was building a massive surplus to spend in his election-year budget.  That’s proven to be the case, exactly as we predicted.  As we heard this morning from OLS, the actual shortfall due to COVID is likely down to a few hundred million dollars, a far cry from the more than $4 billion loss the governor certified to the Supreme Court.”

Asserting that Murphy cannot be given “another free pass,” Oroho accused the governor of playing politics and reckless borrowing.  “Unfortunately, it appears that the Murphy Administration’s only priority is to get reelected this year.  The multi-billion-dollar surplus the governor built while people suffered, the billions he borrowed unnecessarily, and billions in federal aid are going to fund a massive expansion of government in Governor Murphy’s proposed budget, an election year budget, that we won’t be able to afford after this year.”

Senator Mike Testa attacked the governor’s borrowing plan brought before the Supreme Court last year.  He warned that the governor had to be reined in from spending.  “The Court agreed that Governor Murphy could only borrow to replace revenue losses directly related to the emergency. Today, we’re learning that virtually every dollar of the multi-billion dollar revenue loss that the Murphy Administration projected and certified to the Supreme Court to justify his borrowing scheme has failed to materialize. Unfortunately, and likely intentionally, he structured the debt to prevent us from paying it back early once we realized it wasn’t needed to compensate for the ’emergency.’”

Testa took another shot at the administration, adding, “Our only recourse is to say ‘we told you so’ while New Jersey taxpayers are stuck repaying $4 billion of unnecessary debt with interest for the next dozen years.”

Senator Declan O’Scanlon joined with Oroho’s critique of Murphy as having election-year politics in mind during the course of his financial decisions.  “Instead of helping people and businesses when they were desperate for assistance over the past year,” the Republican senator charged, “Governor Murphy sat on a mountain of hoarded cash that he kept in reserve to spend in his election-year budget.  He’s proposing to blow out spending at record levels with borrowed, surplus, and federal relief funds, but he’s not telling New Jerseyans the truth that it’s unsustainable. When those funds are gone, don’t be surprised when he calls for more tax increases to sustain the bigger and more expensive government he’s brought to New Jersey.”

Governor Murphy has had the reality of balancing a pandemic and economic crisis without immediate precedent, but while also contending with an often hostile Democratic-led legislature and a vocal Republican opposition.  New Jersey is a deep purple, but the progressives’ champion must now confront with a bizarre conundrum: did New Jersey do too well to be politique?

If the answer is yes, then New Jersey residents have benefitted from not suffering as much as they may have—an objectively “good thing.”  Lives have been saved and the economic prospects appear to be sunnier than expected—also a “good thing” for most anyone in the state except the administration dealing with the consequences of its short-term success.  What happens going forward for Murphy politically may determine whether he is to be remembered as the pandemic governor—much as how Sir Winston Churchill guided the UK through WW2 as a hero only to promptly lose the post-war election—or continue into another term, tasked with mopping up what had been a titanic disruption to his political objectives for the state when first took office in 2018.

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  • Robert Knapp

    To assail and utter unfair critical comments of the Governor is unfair and biased. Our Governor did in fact, leave a recuperation period of major surgery and moved forward for our state with complete fairness and ability. This pandemic has affected all in the world and we in this country have not been subject to this type of health emergency.

    Shame on those who offer critical comments to a man who has and continues to place the people first.

    Bob Knapp, Jersey City

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