Democratic lawmakers will introduce their own state budget Monday that ditches Gov. Phil Murphy’s long-sought proposal to raise tax increases on millionaires in New Jersey, setting up a showdown with the progressive Democratic governor in the coming days, NJ Advance Media has learned.
In their budget, the lawmakers have also scrapped Murphy’s plans to significantly raise permit fees and enact new taxes on guns and ammunition sold in the Garden State, according to two sources familiar with the budget proposal.
Their proposal also does not include Murphy’s call for a $150-per-head penalty paid by New Jersey businesses that don’t provide health insurance and whose employees are therefore enrolled in Medicaid, the sources said.
The sources spoke on the condition of anonymity because they are not authorized to speak publicly.
Democratic lawmakers will instead put forward a more than $38 billion budget that increases the taxes paid by HMOs and dips into the governor’s rainy day fund.
The Legislature’s budget cuts more than $300 million in spending from Murphy’s proposal in order to provide $50 million more for NJ Transit, as well as more money for property tax relief, including the Senior Freeze program and the veterans’ property tax credit, the sources said.
The budget keeps Murphy’s planned $3.8 billion payment to the state’s public-worker pension system, they added.
One source stressed that lawmakers’ budget is able to fund all “the Democratic priorities that Murphy wants," but without the millionaires tax.
Legislative leaders plan to hold votes on their proposed spending plan Thursday, 10 days before the constitutional budget deadline at the end of June.
That legislative leaders are jettisoning the millionaires tax is not a surprise. State Senate President Stephen Sweeney and state Assembly Speaker Craig Coughlin, both Democrats, have opposed Murphy’s call to raise taxes on people with more than $1 million in income, which would generate $536 million for state coffers next year. They argued they did not need the revenue to balance the budget and would not raise taxes without cost-cutting reforms.
The sources said lawmakers’ budget anticipates ending with a $1.3 billion surplus. Murphy’s administration has been adamant about stashing away more money into reserves to cushion against a future economic downturn. Meanwhile, lawmakers argued the state is not meeting its current obligations and meeting its existing needs.
This is the second year New Jersey’s top lawmakers will defy Murphy and introduce their own budget.
While the Legislature is introducing its own budget, much of the document will resemble the plan that Murphy unveiled in March — with these notable changes and more.
Murphy has not said how he will handle lawmakers’ budget once it lands on his desk. He could negotiate with the Legislature, sign it, veto it in part, veto it in whole or refuse to act altogether. Several of those actions would put the state at risk of another government shutdown.
A shutdown would likely result in thousands of public workers being furloughed, courts and the DMV being shuttered, and state parks and beaches being closed around July 4.
A senior administration official said last week “all options remain on the table.”
“The governor has a lot of tools at his disposal and he wants to work in good faith with the Legislature," the official told NJ Advance Media. “But at the end of the day he wants a budget that gets us beyond June 30 and one that really sets us up for the long term. So he feels really strongly about putting us on sturdy fiscal footing, and he’ll do what it takes to get us there.”
Murphy would not be able to add any sources of revenue, like tax hikes, to lawmakers’ budget.
A similar fight nearly led to a shutdown last year, as lawmakers rejected Murphy’s millionaires tax and passed their own budget. On the brink of a shutdown, Murphy and legislative leaders reached a deal that averted one.