Governor Phil Murphy and the legislative powers-that-be find themselves in a unique position in New Jersey’s fiscal history: what to do with an $8 billion surplus?
With billions already marked for property tax relief, which will serve to at least attempt to address one of the biggest affordability issues in the state of some 9 million, what is done with the remainder will be up to countless negotiations, dealings, and arguments between lawmakers and interest groups.
Politically, it would be in the short-term interest of officials to be able to spend as much as they can in their given districts. This lends political strength for incumbent candidates in the next cycle by allowing them to point to concrete, tactile “products” as a result of their term in office. This makes a strong, natural case for re-election.
Those who are challenging incumbents would be loathe to see heavy spending if only for the aforementioned reasons.
For the well-being of the residents of the Garden State, a strike between necessary investment in the tangible sense as well as setting money aside for New Jersey’s debt, plus the inevitable “rainy day” would present itself as a wise, strategic position. The degree by which special funding touches certain districts would have to be cynically viewed through the lens of political favor. After all, such opportunities are rare when a state has to figure out what to do with such a large lump of cash.
For the governor, allies in battleground districts such as LD2, LD11, and LD16 would be valuable to bolster and support in the chess-game that is New Jersey politics. In exchange for firm and close support, it would not be unreasonable to see those districts have the most favorable chances of acquiring the special funding their respective representatives are looking for. In a slightly more Machiavellian sense, those districts and municipalities which are not led by particularly firm Murphy allies might need to soften their approach to the state’s chief executive if they want to get a piece of the pie for the benefit of their constituents as well as their political prospects.
Both Republicans and Democrats appear to be in agreement on one thing, at least: New Jersey is too expensive. How to address that is where they diverge.
The state budget is being worked on as of the time of this writing. Exactly what it will roll out to be has yet to be seen. However, Insider NJ did have the opportunity to speak with some key state figures for their take on the process thus far.
“I think it’s going to be an excellent budget overall,” State Senator Andrew Zwicker said. “But of course, we are in such an unusual circumstance where there is so much money that the real negotiations are, how much do we spend now? How much should we put aside for the possibility of economic downturn? How much do we use to pay down debt to save money? It’s a good budget from that perspective, all around. It’s an opportunity to do really transformative types of work that is really necessary.”
Zwicker said that he had been in conversations about improving water infrastructure, running the gamut from lead water lines, stormwater, waste water management, and more. “That’s part of infrastructure: we think often of roads and bridges, but our water infrastructure has been neglected for so long. So along with ensuring that our bridges are safe and our roads are well maintained, I think there’s a real significant opportunity here to do two major pieces of key funding.”
Zwicker also hailed the property tax relief that was underway. “We are going to offer to send back to the people of New Jersey the biggest single property tax reduction in our history, $2 billion. That is going to reach 2 million families. It’s a really unique time and it makes me very optimistic in this last week that we’re going to end up with a very strong budget.”
Property tax and property tax relief is a familiar Republican talking point. Given that Democrats, and the governor especially, have been talking about and actively promoting the idea of tax relief, well-meaning fiscal conservatives should, in theory, be pleased.
“I’m fortunate enough to be on the Budget Committee,” Zwicker said. “These are things that we Democrats and Republicans talk about all the time. It really comes down to, once you push the politics aside—which can be difficult at times, but it is so important here—it really comes down to differences on how everyone is in agreement. We have this surplus, part of what we need to do is make New Jersey more affordable. Part of that is just putting money back into people’s wallets and their pocketbooks, etc. The policy debate is more about the mechanism to do it. For instance, my Republican colleagues have proposed, not even counting the property tax, just sending money back to people. On the Democratic side they have proposed doing it through property taxes in particular, but adding renters as well. So, we’re headed down the same path. Our differences are just simply on the mechanisms to do it.”
When the COVID-19 pandemic struck, the entire world was turned on its head. New Jersey was among the first states to be hit, and hit very hard, when the coronavirus took root in the United States. This underscored the need for emergency contingency planning, not just in a physical and policy sense, but also an economic sense. It can be very tempting for politicians to raid a rainy day fund, but when the funds are needed and not there, the state needs to plead with DC. To his credit, Governor Murphy was able to work with then-President Donald Trump, establishing a friendly rapport even, and get cash infusions into the Garden State. While the pandemic’s most pressing emergency features have seemed to subside for now, monetary woes in the form of inflation and high prices are now besieging the weary residents of New Jersey. Wise fiscal policy in Trenton is crucial.
“There’s similar debate on how much do we put aside for a rainy day?” Zwicker continued. “Between inflation and raising interest rates at the federal level, most people think we’re headed towards economic downturn, if we’re not in it already. We want to make sure that what we’re funding now is sustainable. That’s another point of contention: whether or not it is truly sustainable? It’s a fair question to ask. But I also strongly believe that we on the Budget Committee and the Democratic caucus are very mindful of that.”
Senator Vin Gopal was likewise optimistic about the forming budget. He cited the $2 billion in property tax relief as well as the school supplies sales tax holiday as positive developments. “I’d like to see something related to the gas tax relief we’re pushing for,” he added. “Overall this is also going to be a budget that I think is going to invest heavily in our rail lines, NJ Transit, and school construction, which is important. It’s going to be a lot of good items that are positive for the state of New Jersey.”
Gopal did not predict any political footballs arising from the budget, asserting that it would be a commonsense product. “From my understanding it’s going to be a very bipartisan budget. I think if anybody votes against it they’re voting for the purpose of politics, not on what’s in the best interest in New Jersey and a $2 billion property tax program. We’re talking about $1,500 off people’s property taxes permanently and a billion dollars, if not more, in school construction.”
Listing beneficial projects such as updating schools, mass transit, childcare packages, and more, Gopal said that while all these were good, the budget itself was also being crafted around a “significant tax cut” for residents.
Like Zwicker, Gopal was looking forward to Republican support for the state’s budget, although it would be unlikely to find many GOP contenders expressing too optimistic a sentiment if only to keep their voting base engaged.
“I’m always hopeful. I can tell you many of these tax proposals are similar to the proposals that they’ve introduced and talked about. If they look for one or two reasons why they don’t want it, they’re playing politics. But I think, in theory, they had a tax cut proposal and we got a tax cut proposal. The numbers are similar. So, I’m always optimistic.”
For Republicans, getting the policies in place while not being in office to take credit for it could be a bitter political pill to swallow. Murphy knows this, too, of course, and it would behoove areas under Democratic control where Republicans might be making inroads to capitalize on the opportunities presented.
Atlantic County Democratic Chairman Michael Suleiman said that the property tax relief would be a “Godsend” for the working people of Atlantic County.
“We certainly haven’t seen the final budget yet. I suspect there has been a lot of collaboration already between the Governor, the Senate President and the Speaker,” Suleiman said, “with the expanded Anchor rebate program, which is a really big deal for a lot of families in Atlantic County, certainly the full pension payment is another big deal, the continuing lowering of debt service. We’re getting there, in terms of the finances.”
Suleiman acknowledged that inflation needs to be handled, although that is “above the paygrade” of anyone in Trenton. Where the state can help, however, he asserts would have a strong impact. “Property tax rebates are going to put a lot of money back into people’s pockets. In Atlantic County, the median income, or the per capita income, is $34,000. This is not an affluent county by any means, our people need help. So, I’m hopeful we have a good final budget, I think both the governor and the legislature recognize that everybody should have a role in terms of how these COVID dollars are spent.”
Echoing the other Democratic leaders, Suleiman framed the budget as a bipartisan one, although a final product has yet to be seen. ”I think it is a very collaborative budget. It seems like everybody’s getting along and let’s see what the Republicans do on the budget. They’re allergic to giving Governor Murphy and the legislative Democrats any political victory.”
Will the budget be beneficial to Republican residents? It is likely, in so far as it benefits residents in general. But it is also likely that the budget will allocate funds to areas which Republicans reject as unnecessary or wasteful, or as political “Christmas tree” items. Suleiman had choice words for would-be complainers in the GOP. “It’s easy to be in the minority because you can vote against stuff and it really doesn’t matter, because you have the luxury of not doing the hard work. When you’re the majority, like we are in Trenton, we have the responsibility to actually govern.”
That being said, the 2021 election brought Republican former Assemblyman Jack Ciattarelli within 3 points of sending Governor Murphy to the exit. Democrats did not see the kind of turn-out they expected and there has been a widespread belief that the governor’s progressive policies, combined with general anger with respect to COVID policies, benefitted the Republicans.
“Last year’s disappointing election result was a wakeup call,” Sulemain said. “Democrats are a broad mix of moderates, progressives, and liberals and there was a recognition after last year that we’ve got to tackle affordability in the state of New Jersey. I think the Governor and the legislative leaders are doing just that. If the Republicans want to be against making New Jersey more affordable then that’s fine by me, and we’ll beat them in the next year.”
Somerset County Republican Chairman Tim Howes represents a fairly affluent county in contrast to Sulemain’s. “I don’t have a sense that there’s anything specific that is going to help Somerset County out,” he said with respect to the budget taking shape. “We have sort of become the odd county out. We don’t necessarily need the same things other counties need. But they have a surplus. Our county would love to see it used to cut taxes or rebate taxes, or, my own personal opinion would be to pay down some of the debt which is what drives high taxes. I think Somerset County would be best served by attacking it from that direction instead of just spending more money out there.”
Howes remains content to watch how the process unfolds. “What always gets me is how much happens in the last 48 hours.”
While there is bipartisan agreement that New Jersey is an expensive state, for Howes, tackling affordability comes by rebuilding Republican strength in Trenton. “The first thing we need to do, but that doesn’t help much with this year’s budget, is to win back majority in one or both of the houses in 2023. The difference between the amount spent in Governor Christie’s last budget and the amount spent in last year’s budget is about, I believe, a 30-plus-percent increase. We have a larger budget than Pennsylvania, which is much bigger than New Jersey.”
By capturing the Assembly, Senate, or both, Howes says, the Republican Party could put a check which has hitherto been absent on Democratic spending. He cited progress made since the last election, although the Democrats are still in overall control.
“In Somerset County, one of the most affluent counties in the country, Democrats and Republicans alike here are very fortunate,” Howes said. “We send a lot of money down to Trenton through the income tax and the other taxes. Affordability can be addressed by first stopping the growth in spending and then finding some ways to cut it down. I don’t think that’s going to happen this year. There’s no check and balance on Democrat rule.”
Howes said that, historically, money generated from the suburbs had been disproportionately going into the urban areas, leaving them as the “forgotten” parts of New Jersey as far as crafting policy is concerned. “[The cities] are the Democrat strongholds. Now the people in the cities deserve our support and our help if they need it, but it’s gone too far. It would be nice to see a budget that recognized all parts of New Jersey. I don’t represent Cumberland County, but Cumberland County is a forgotten part of New Jersey that never seems to get a break. Somerset County is in a different pair of shoes but spending is not even. It all seems to get directed towards billions spent in cities. When people move out of Somerset County, they move south and they move west. And I don’t mean to Hunterdon County, I mean to North Carolina, South Carolina, Florida, Arizona.”
Somerset County, Howes said, has paid the price for 20 years of Democratic rule, but he does not despair. On the contrary, Howes is also optimistic, if not necessarily for the final package that the state budget will manifest as, but for the future of the GOP in the state. “I think that [Assembly] Leader [John] DiMaio and [Senate] Leader Steven Oroho are fighting hard for New Jersey’s budget. They are both budget experts. We’ve had good leadership in the past, but I really see some fight from those two leaders from the caucuses. What does that mean? We’re going to succeed? You never know.”