New Jersey

A Look at NJ's Budget Proposal: Taxes, Schools, Pension

This photo provided by the New Jersey Governor's Office shows Gov. Phil Murphy as he signs into law legislation to set up a recreational marijuana marketplace, Monday, Feb. 22, 2021, in Trenton, N.J. A recreational marijuana marketplace, cannabis decriminalization and looser penalties for underage possession of the drug and alcohol became law in New Jersey, more than three months after voters overwhelmingly approved a ballot question to legalize adult use of the drug.
Edwin J. Torres/New Jersey Governor's Office via AP

New Jersey Gov. Phil Murphy's $44.8 billion budget proposal, unveiled last week, is a boon for labor and public sector pensioners, thousands of middle class residents and schools across the state.

Though, the spending plan must first go through the Democrat-led Legislature before it becomes law, the governor's proposal by and large sets the boundaries for discussion. At nearly 9% bigger than the previous year, it represents a doubling down on Murphy's commitment to use taxpayer dollars to fuel the state's economy, which has been devastated by the COVID-19 outbreak.

To Republicans, it's an obvious election year play, boosting funding as a way to build support for the governor's reelection prospects. It's also unaffordable, they contend, taking particular exception to borrowing of about $4 billion during the current fiscal year.

For Murphy, it's hardly out of character. Since the 2017 campaign, he's promised to increase public pension and school funding as a way to make good on years of missed payments by governors of both political parties, financed by higher taxes on the wealthy.

The budget is a political flash point, but it also a policy instrument that distributes billions of dollars to millions of people across the state.

The current fiscal year ends on June 30. Lawmakers are expected to begin holding public hearings on the governor's proposal as soon as this month.

A closer look at some winners and losers under the first-term governor's latest proposal.


Nearly 800,000 residents will be getting up to a $500 tax rebate under the budget. That is poised to happen whether there's an agreement between lawmakers and Murphy last year over raising taxes on those making more than $1 million a year.

Under the deal, couples making up to $150,000 a year with at least one dependent child would get back up to $500. The threshold for individual filers is $75,000 a year.

The child and dependent care tax credit threshold, currently capped at $60,000, would climb to $150,000 under the budget.

About 70,000 families currently get the credit. That would climb by 80,000 under the governor's spending plan. The average value of the credit would climb by $110 for poorer families, reaching nearly $300. At the higher end of the income spectrum, the credit is estimated to be worth less than $100, according to budget documents.


New Jersey's public worker pension plan has been underfunded for decades, but lawmakers and former Gov. Chris Christie began a ramped-up payment plan. Murphy wants to supercharge that plan and reach full payment a year early under the budget.

The payment would climb by $1.6 billion over the current fiscal year. The payment doesn't translate to a boost in pensions for retirees. But it meets what actuaries have determined is the amount the state must pay to carry its share of the cost of pension payments to hundreds of thousands of retirees.


Schools would get nearly $600 million more in funding, or a nearly 7% increase. Murphy's predecessor declined to budget for the state's school funding formula. Murphy estimated that led to about $9 billion over eight years. Murphy hasn't closed the gap, but he's arguing that boosting funding is better than keeping in flat. He's also pitching school funding as property tax relief.

While state funding for schools has slowed the growth rate of local property taxes, they're still up to an average of more than $9,000 a year—among the highest in the nation.


Murphy is seeking to keep NJ Transit fares flat — meaning no hike for riders — for a fourth year. Despite the fare hike, the governor's proposal seeks to use $100 million from the transit agency's capital budget to fund operations, a long-standing raid that goes back years. The governor had said he wanted find a dedicated source for NJ Transit, but this budget does not stablish one.

Copyright AP - Associated Press
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