On February 28, Governor Murphy delivered his 2024 Fiscal Year Budget Address. The proposed budget is $53.1 billion, includes a surplus of over $10 billion, and is 5% greater than the FY2023 budget. While the budget document is not available yet, the Budget in Brief outlines the Governor’s proposed FY2024 budget. In the coming weeks, departmental budget hearings will be held and provide additional information on the Governor’s budget proposal.
Over 48% of the proposed FY2024 budget recommendations are allocated to direct and indirect property tax relief programs (school aid, municipal aid, and direct property tax relief). School aid increased by 5.6% and other local aid increased by 4.9%, while municipal aid decreased by 4.2%.
As noted in the Budget in Brief, Governor Murphy’s Fiscal Year 2024 Budget proposal is focused on maintaining the initiatives and reforms of the last five years while also preparing New Jersey for the future. The budget is aimed at building a state where families can afford to make the American Dream a reality, where every child sees their opportunity in the future, and where responsible and far-reaching solutions are implemented to address economic, social, and environmental challenges. The proposal includes tax cuts, direct assistance for families, support for seniors, investments in education, healthcare, and public safety, and initiatives to promote economic growth and opportunity. The budget is also designed to address long-standing problems as well as new issues created by the pandemic and inflation while ensuring that New Jersey has a strong fiscal foundation to make critical investments in the future.
Governor Murphy’s proposed FY2024 budget includes almost $1.6 billion in municipal aid, which reflects his administration’s commitment to supporting shared services and local assistance.
Energy Tax Receipts
The FY2024 budget does not include the $75 million in Municipal Relief funds provided in FY2023. The revenue line item for Energy Tax Receipts is $798,398,000. We have reached out to the State for information on what municipalities can anticipate for Energy Tax Receipts in their CY2023 budgets.
Municipal Health Benefits
The State expects to spend $5.5 billion on health benefits payments from all resources for state, municipal, and education enrollees. There is an additional $200 million from the American Rescue Plan's State Fiscal Recovery Fund (SFRF) to State Health Benefits Program members and local governments that have experienced significant cost increases in health benefit costs. These one-time grants would be conditional on sustainable and actuarially verified savings ideas, which could include, but are not limited to, value-based and alternative payment models, medical pharmacy reforms, and migration from legacy plans.
For FY2024, the proposed budget pension contribution includes $7.09 billion, including the State lottery funds. This would be the third consecutive year in which the pension fund payment meets or exceeds the Actuarially Determined Contribution.
American Rescue Plan Firefighter Grant Program
The Governor is also proposing to add an additional $10 million to the American Rescue Plan Firefighter Grant Program, which has already provided funds to 293 fire departments to ensure firefighters have proper protective, cleaning, and sanitization equipment during the COVID-19 pandemic.
Senior Freeze Program
The proposed budget increases the qualified income threshold under the Senior Freeze program to $150,000 and reduces the waiting period from 10 years to three years.
Main Streets and Development
The proposed budget includes $50 million for the Main Street Recovery Program to support small businesses and $20 million for manufacturing initiatives.
The Governor has proposed the creation of a Boardwalk Fund to assist with repairs and renovate the seaside attractions. The budget allocates $100,000 from the American Rescue Plan funds for this program. Combining State Fiscal Recovery Funds budget allocation along with, local contributions, and private capital the funds will be used to make critical investments needed to enhance climate resiliency along the Shore.
Urban Investment Fund
Using State Fiscal Recovery Funds, the FY2024 budget proposes the creation of an innovative new Urban Investment Fund to revitalize urban areas where shifting patterns of work and commuting since the pandemic have reduced foot traffic and created ongoing challenges to community vitality. The grant funding would be flexible to respond to the cities’ needs and could include arts and cultural investments, beautification projects, public safety and streetscape improvements, investments in pedestrian environments and new open space, and funding to reimagine the use of now underutilized office spaces.
The proposed budget includes funding for various programs for affordable housing. It includes an additional $15 million for enhanced benefits for first-generation homebuyers; an additional $100 million of American Rescue Plan funds for the Affordable Housing Production Fund; and maintains the dedicated revenue in the Affordable Housing Trust Fund.
The FY2024 budget includes significant investments in clean energy and environmental initiatives in New Jersey. The Clean Energy Program will receive $274 million to support programming, an increase of $12 million from FY2023. The budget also includes $40 million to seed a new Green Fund at NJ Economic Development Authority (EDA), which could attract up to $280 million in private capital to advance projects to advance the State's new environmental goal of 100% clean energy by 2035. The State is also increasing its goal for offshore wind power generation from 7,500 megawatts (MW) to 11,000 MW by 2040. The Board of Public Utilities (BPU) will study the feasibility of increasing the target further.
New Jersey is on track to meet or exceed its one-year record for new solar installations, and the State has created two incentive programs for residential (Administratively Determined Incentive Program) and large grid-scale solar (Competitive Solar Program) projects. Additionally, BPU plans to release a proposal for a permanent Community Solar program for stakeholder feedback in the coming months.
Electric vehicle adoption has continued to increase year over year. The BPU has approved over $215 million in utility programs to incentive the Make Ready Program for over 1,500 fast chargers and over 6,000 Level 2 chargers over the next four years.
Liquor License Reform
Governor Murphy's proposal in the 2024 NJ State Budget aims to reform the restrictive and expensive liquor license system in New Jersey to increase availability and affordability for small businesses while maintaining local control. The proposal includes phasing out the population cap on licenses, creating two new licenses available at lower costs, establishing tax credits for existing license holders, maintaining local control, and handling inactive licenses by the municipality. The proposal also expands the rights of certain holders of brewery, cidery, meadery, distillery, and winery licenses. The New Jersey Economic Development Authority estimates that the proposed reforms could generate up to $10 billion in new economic activity over 10 years and create upwards of 10,000 jobs annually, which could support restaurants in the aftermath of COVID-19.
Cannabis Regulatory Commission
The FY2024 Budget mentioned that the New Jersey Cannabis Regulatory Commission has partnered with the New Jersey Business Action Center and EDA to create two new State programs to support cannabis businesses with business development support and capital assistance funds for license applicants. The Department of Labor has launched a Retail Cannabis Worker Training Apprenticeship with Rowan University.
In FY2023, the Commission has awarded 80 total annual adult-use cannabis business licenses, including awards to 38 retailers. There are 33 total medicinal cannabis dispensaries, with 21 of these also offering adult-use sales.
Recreational and medical cannabis are expected to generate over $43 million in revenue in FY2023 and over $77 million in FY2024. The revenue will support investments in priority areas such as economic and community development, re-entry and community-based violence intervention programs, youth services, and public health programming and lab capacity. The Social Equity Excise Fee will also be invested in economic development and community resources in Impact Zones, and the Commission will make spending recommendations to the Governor and Legislature.
In addition, Governor Murphy's FY2024 budget appropriates $2 billion for the State Transportation Capital Program. Of that amount, $1.24 billion will be used for critical investments in State, local highway, and bridge projects, while another $760 million will be allocated to NJ TRANSIT capital projects.
The budget proposal also includes continued support for Local Aid and Economic Development Grants, which have advanced a wider range of transportation options, including bikeways and smart, transit-oriented development. The Governor plans to increase the investment in the Simple Fix Safety Program, which will enable NJDOT to advance innovative traffic and pedestrian safety projects.
NJ Transit will continue to make critical investments in its train stations and train more locomotive engineers to improve safety and reliability. Since FY2018, NJ Transit has graduated 14 classes of locomotive engineers, adding 157 engineers to its ranks. The budget proposal also includes $760 million for NJ Transit capital projects, which will allow the agency to continue making critical investments in its fleet, infrastructure, and facilities.
Since 2018, the New Jersey Department of Transportation (NJDOT) has invested over $9.9 billion to support maintaining local, county, and State highways in a state of good repair. Through FY2024, it is estimated that the Murphy Administration will have invested almost $2.5 billion in pay-as-you-go funding to support the State's Transportation Capital Program.
The FY2024 budget proposal for New Jersey includes significant investments in water infrastructure, with a total of nearly $1.2 billion allocated for clean water and drinking water projects, surpassing the previous record of $726 million in FY2021. This funding will be sourced from various channels, including the State Fiscal Recovery Fund, ongoing support from the Water Bank, and federal funds from the Infrastructure Investments and Jobs Act. These investments aim to improve the quality, affordability, and resiliency of the state's drinking and wastewater infrastructure.
Additionally, the budget includes $8 million in additional appropriations for shore protection and flood risk mitigation projects. This will provide matching funds for U.S. Army Corps of Engineers projects to replenish beaches.
The budget proposal also includes funding for 18 additional Department of Environmental Protection (NJDEP) staff to maintain and improve urban state parks and continue last year's popular park fee waiver. An additional $500,000 has been earmarked to support the use of bear-proof trash receptacles to reduce the number of bear-human interactions. The budget also proposes $160,000 for deer management grants to help localities develop management plans and administer hunting and processing activities.
The budget provides for $8 million in additional funds for statewide expansion of the Alternative Responses to Reduce Instances of Violence & Escalation (ARRIVE) Together Program; continues $10 million to support Community-Based Violence Intervention programs; and includes funding for staff for new units and expanding existing units with a focus on reducing gun violence, reducing auto thefts, and reducing exploitation, such as human trafficking and labor cases.
Mental Health Programs
The budget includes $43 million for NJ Statewide Student Support Services (NJ4S) network. This new model for delivering mental health services to youths will create 15 regional hubs to support the delivery of prevention services in schools, as well as other community locations including libraries, community centers, faith-based organizations, and family success centers.
The FY2024 Proposed Budget continues $85 million in support to food banks and emergency feeding organizations. It also expands access to free school meals under the Working-Class Families Anti-Hunger Act for children in families making under 200% of the federal poverty level with more than $20 million in new funding.
Military & Veteran Affairs
The proposed budget will expand Veteran Service Offices from the existing 14 offices to an office in every county. In addition, the budget includes funding to begin the process of converting double-occupancy rooms at veteran homes to single occupancy.
The American Rescue Plan's State Fiscal Recovery Fund provided $6.2 billion to New Jersey in 2021, and the Governor has allocated approximately $4.8 billion of that money toward various purposes, such as public health, economic stabilization, water infrastructure, childcare and pre-K investments, eviction prevention, and affordable housing. The Governor plans to work with the Legislature to allocate all uncommitted funds in this year's appropriations act. The Administration’s focus is on one-time transformative investments in people, communities, and infrastructure. (Page 53 and 54 of the Budget in Brief outlines a list of current and potential allocations of the State’s American Rescue Plan State Fiscal Recovery Funds.)
The FY2024 budget allocates $20.5 billion, including $867.1 million from the Lottery Enterprise Contribution Act, for pre-K to 12 education. This amount includes direct payments for pension and health benefit payments for educators.
The budget also proposes $832 million over FY2023 in aid. This amount includes reallocations from overfunded districts to over 400 underfunded districts. The increase is due in part to inflationary growth and will assist schools with rising costs and limit excessive growth of property taxes.
Also proposed is $109 million in new spending for pre-K, which fully funds programs started in FY2023 and includes $40 million to expand programs to new districts or support other expansion needs like workforce development. The Department of Education will continue to work with stakeholders to advance the New Jersey Strategic Plan for Preschool Expansion and develop its second phase.
New Jersey Performance and Outlook for the Future
According to the Governor’s Budget in Brief, New Jersey's economy has shown moderate growth in the first three quarters of 2022, with a State Gross Domestic Product (GDP) growth rate of 1.7% in the first quarter and 3.9% in the third quarter.
The State's labor market saw a solid boost in 2022, with employment levels surpassing pre-pandemic levels and the unemployment rate improving to 3.4% in December 2022. Salary and wages rose 7.8% in the second quarter of 2022.
The State's personal income growth of 5.5% in the third quarter outpaced that of both New York and Pennsylvania. The recovery remains uneven, with workers in low-wage sectors feeling the brunt of the economic impact of the COVID-19 pandemic.
The housing market in 2022 slowed substantially from the previous two years amidst rapidly rising mortgage interest rates and elevated home prices. According to New Jersey Realtors’ data, existing home sales growth started to fall near the end of 2021 and total closed sales in 2022 fell 17.8% from 2021. Transaction prices continued to rise substantially with the average price of a single-family home reaching nearly $593,000 in 2022, 9.3% higher than in 2021, but declining over the last six months of the year.
The Governor’s Budget address is the first step in the State’s budget process. In the coming weeks, the schedule will be released for public hearings on the budget and departmental hearings before the Assembly and Senate budget committees. We will continue to advise you throughout the process.
Contact: Andrew LaFevre, Legislative Analyst, email@example.com; 609-695-3481, x. 116