Governor Murphy Unveils Second Budget

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TRENTON, N.J. -

Governor Phil Murphy unveiled his second budget Tuesday, calling for about $1 billion in increased spending in the coming fiscal year that would be financed by higher income tax rates on wealthy residents and savings in public worker benefits.

The first-term Democrat presented the fiscal year 2020 budget in a roughly hour-long speech Tuesday before a joint meeting of the Democratic-led Assembly and Senate, casting the spending plan as fiscally responsible and fair.

He also nodded to his self-described progressive achievements, including a phased-in $15 minimum wage and paid family leave.

"This budget is how we make real the promise of a stronger and fairer state that works for every family. And, it builds on the progress we have already made," Murphy said.

His fellow Democrats praised the budget as an improvement over last year's effort when he proposed cuts to programs they supported and focused little if at all on savings.

But they also said they're opposed to higher taxes.

"This is a positive budget plan that takes meaningful steps in the right direction, but I remain opposed to the proposed tax increase, Senate President Steve Sweeney said. Assembly Speaker Craig Coughlin sounded a similar note in a news conference after the speech.

It's unclear how Murphy will navigate such a hurdle, but he said in the speech he realizes he'll have to negotiate with legislators

In an interview later, he declined to weigh in on how specifically he'd negotiate and over what terms.

"There's an acknowledgement that we may not agree on everything, but we've got to find common ground," he said.

Murphy's $38.6 billion proposal is roughly 3 percent higher than the current $37.4 billion budget, which expires July 1 and must be succeeded by a balanced plan under the state constitution.

Among the changes Murphy proposes are boosting income tax rates for those who make more than $1 million a year to 10.75 percent, up from 8.97 percent. If approved by lawmakers, that move would capture high-income earners left out of the tax hike on people making $5 million and above that Murphy and leaders agreed to last year.

The governor says the hike would generate about $450 million and would apply to about 18,000 residents with incomes from $1 million to $5 million.

He's also seeking what he calls a "corporate responsibility fee" of $150 per worker for large employers with more than 50 employees who use Medicaid for health care. He says the fee would incentivize employers to provide benefits.

Murphy's budget has about $1.1 billion in savings, mostly from lower public worker health benefit costs that have been agreed to by labor unions.

The savings are expected to come from shifting workers into cheaper health care plans, lowering costs related to out-of-network providers. It would also boot ineligible dependents from state plans, such as divorced spouses.

Murphy says the $1.1 billion in savings is a 16 percent reduction in costs year-over-year. About $200 million of the savings will come from state government staff reductions and other "departmental savings."

On the spending side, Murphy proposed increasing general fund support for New Jersey Transit from roughly $307 million to $407 million. He said there would be no fare increase under his budget if approved.

Murphy proposed increasing aid for education by $206 million, or roughly 3 percent. The former Goldman Sachs executive and Obama administration ambassador has said increased education aid takes pressure off local governments that levy the state's sky-high property taxes.

He's also proposing $201 million for a property tax relief program that benefits seniors and disabled residents by freezing their rates. That's roughly a 1 percent decrease in the program from this year, reflecting a decline in applications, according to the state Treasury Department.

He's also budgeted $283 million for property tax rebates for moderate-income families.

Murphy is also seeking to increase the state's surplus, which began the fiscal year at about $1 billion, to about $1.2 billion.

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