On Monday, April 4 the legislative hearings on Governor Murphy’s proposed $48.9 billion FY2023 budget began. The Assembly Budget committee heard testimony from the New Jersey Office of Legislative Services (OLS), and the New Jersey Department of Treasury. On Tuesday, OLS and the Department of Treasury provide similar testimony before the Senate Budget Committee.
Office of Legislative Services Hearing
Thomas Koenig, Legislative Budget & Finance Officer, and David Drescher, Section Chief, Revenue, Finance & Appropriations Section provided testimony on behalf of OLS. OLS explained that in FY 2022 revenues have exceeded expectations. The FY 2022 revenues are projected to be $4.9 billion more than anticipated. OLS also noted that Governor’s Budget proposal includes growth of $2.5 billion or 5.5% in revenue from FY 2022.
In his testimony, Thomas Koenig noted that “In short, the revised FY 2022 and proposed FY 2023 budgets meet the constitutional requirement of a balance budget and leave a projected surplus of $4.6 billion. But a look ahead might be warranted. A budget that relies on $1.7 billion in surplus to be balanced is not sustainable in the long run, when the surplus is $4.6 billion. Maybe revenue growth will continue to surprise us and will close, or at least considerably narrow, the gap. But as federal expansionary fiscal and monetary policies have run their course and inflation-fighting has become a priority, the pressure on the economy is only beginning to build up.” In other words, “this budget proposal could be viewed as engaging in deficit spending when revenues are exceptionally energetic.”
OLS indicated that there is going to be further interest rate hikes which will affect the tax revenue raised by the state. OLS stated that they will have revised numbers once tax filing payments numbers due at the end of April are received.
David Drescher noted in his testimony that while it has been difficult to forecast in the past few years “the Governor’s revenue expectations are reasonable, even though they are significantly lower than ours” and that “the coming fiscal year poses a new set of economic risks that could affect revenues.”
Mr. Drescher also noted that “there is a substantial difference between the OLS and Executive forecasts, totaling more than $3.2 billion over the two years. The difference is big enough to nullify the concerns about spending down surplus that the Legislative Budget and Finance Officer noted in his remarks. Although large, this sort of discrepancy should not be surprising in the context of our unusual fiscal times.”
New Jersey Department of Treasury Hearings
Following the OLS hearings, the New Jersey State Treasurer Elizabeth Maher Muoio gave her testimony on Governor Murphy’s proposed FY 2023 budget Treasurer Muoio highlighted that the impact of the State recovering 89.9% of jobs lost at the beginning of the pandemic with unemployment at 4.6%, salary and wages increasing by 8.4% in 2021, an increase in retail sales by 20.5%, single price homes in New Jersey increasing by 14.4%, and nationally corporate profits increased by an estimate 25% has been remarkable for state revenue collections. The Treasurer also noted that the “majority of the difference between our forecast and OLS’s forecast is represented by the CBT (Corporate Business Tax) and PTBAIT (Pass-Through Business Alternative Income Tax), which are two of the State’s most volatile and unpredictable revenues. That, together with international and national economic concerns for FY 23, regarding interest rates and supply chain issues, would suggest a more cautious approach should be taken.”
The State Treasurer also explained that the FY23 revenue forecast “assumes moderation in growth from the recent robust performance” and that “some revenues are expected to grow at rates closer to historical norms, such as GIT (Gross Income Tax) and the Sales Tax, while others are expected to decline, such as the CBT, the PTBAIT, and the realty fees.
During her testimony, State Treasurer Muoio backed Governor Murphy’s statement that the FY 2023 budget will directly help reduce property taxes by funding schools with $9.9 billion. The funding would reduce the need for increased property taxes to support schools in New Jersey, she stated. There was little discussion regarding municipal funding for Consolidated Municipal Property Tax Relief Aid (COMPTRA) or the restoration of Energy Tax Receipts (ETR).
During the hearings members of the Assembly Budget and Senate Budget and Appropriations Committees commented and questioned OLS and the State Treasurer on their testimony. Assembly Budget Chair Eliana Pintor Marin questioned how American Rescue Plan Act (APRA) funding would be allocated according to the FY 2023 budget. Treasurer Muoio responded that the Department of Treasury will be working with the Legislature to determine the best fits for ARPA allocations, but Governor Murphy wanted ARPA funding to be allocated to small childcare benefits, student mental health support, and development of workforce development programming as presented in the Budget in Brief document.
Assemblywoman Annette Chaparro noted the strain on the 9-1-1- system from the pandemic, brought to the Treasurer’s attention that there needs to be more allocation to the 9-1-1 fees to help New Jersey’s emergency call infrastructure.
Assemblyman Hal Wirths and Senator Mike Testa raised concerns regarding the fiscal sustainability of the budget, expressing disapproval for the current administration’s drastic increase in spending over the past two years.
The League will continue to provide updates as the budget hearings continue. To view the schedule for budget hearings see the legislative calendar.
Contact: Andrew LaFevre, Legislative Analyst, alafevre@njlm.org , 609-695-3481 ext. 116