With just around five weeks to go, the Legislature is hammering out the details of Gov. Phil Murphy’s budget plan. It needs roughly $1.5 billion in new revenues to fund his proposals and meet obligations. It also hinges on buy-in from top Democratic lawmakers. The problem is, both the Senate president and Assembly speaker aren’t sold on it, and earlier this week State Treasurer Elizabeth Maher Muoio told the Budget Committee that revenues are flat and that they shouldn’t plan on an April surprise. Treasurer Muoio joins Correspondent Briana Vannozzi from Trenton.
Vannozzi: Thank you for being here. We know you have an especially busy week. So, when you testified before the Legislature you said, ‘listen we need to urge these revenue raisers or we risk draconian cuts.’ What’s on the list out of Gov. Murphy’s plan to be cut then?
Muoio: Well, the governor has proposed a balanced budget. So he has proposed revenue raisers in order to get where we need to be in terms of funding just to keep our fiscal ship afloat and to make a few investments in education and infrastructure that most seem to be in favor of. So, the revenue raisers that he proposed will give us this balanced budget and it’s now in the Legislature’s hands to determine if they do not want some of the revenue raisers that are proposed, how will they present back a balanced budget. So, they’ll need to look at the budget, look at what the funding priorities are and make a determination. And we’ll be in discussions with them. We want this to work out for the people of the state, so we will be working with the Legislature, the governor will be working with leadership, and we anticipate a lot of discussions going on in the next five weeks.
Vannozzi: So, to be clear madame treasurer, we’re talking about raising the sales tax back to 7 percent, that was the trade-off from the gas tax agreement, as well as a millionaire’s tax, that’s a 10.75 percent increase on income earners over a $1 million. How much revenue would that raise, and is that enough to sustain these plans moving forward, so that may help this budget year, but is that enough moving forward?
Muoio: Well, every year we will be looking closely at how our revenue is matching our spending plan. As I mentioned, we have a constitutional obligation to present a balanced budget each and every year. There are a lot of things that are tough to predict with each and every year, but we will be looking to make sure our revenue sources meet our expenditure plans, and if that has to be adjusted in future years, that’s the action we will be recommending. But, the gross income tax proposal that we have regarding the millionaire’s tax would bring in, we are estimating approximately $770 million in revenue. That’s a marginal tax increase, so we’ll only attach at the first dollar over $1 million. Unlike some other states, New York for example, will reach back to the first dollar and apply that higher level to the first dollar earned. The New Jersey tax is marginal and will only attach at the first dollar. The sales tax restoration to 7 percent, which is where it was in 2016, it was lowered to 6.625 percent in January of this year, will bring in approximately $545 million in revenue, also. So those are our two main revenue initiatives. The new spending that we’re proposing, it comes to roughly $660 million in new spending in this budget out of the $1.6 billion in revenues that we are proposing to raise. And that $660 million, over 90 percent of that is either going to education or infrastructure through NJ Transit, both areas that had been sorely underfunded over the past decade.
Vannozzi: You know, it wasn’t long ago that you were sitting on that other side, in fact on the Budget Committee. So, if these proposals were put before you, again now and you were still on that side, would you vote for these revenue raisers for this millionaire’s tax knowing the concern over tax flight. Would you vote for that now?
Muoio: Yes. First of all, being on this side, in the administration, we see everything here in terms of what the needs are and what the challenges are. Moving forward in terms of the revenue raisers that we have to do, we really don’t have a choice in the state. If we were to do nothing, if we were to add no new programs and just budget for growth, regular growth in our health care costs, our pension payment, we would have a deficit if we were to do nothing. We’re really at the point where we have no choice but to bring in revenue raisers. It’s a challenging year, I understand. I understand that, having sat on the other side of this discussion, but we had to make some very tough choices this year. And the governor’s put forth a budget that provides sustainable revenue sources that can take us into future years, not one-shots. We have a historic lack of reliance on one-shot revenue sources under 1 percent. We’re also seeking to build up our surplus in this budget. That has been a priority of this governor. We’ve heard from ratings agencies that the states that have emerged from trying fiscal times the most successfully, the states that came out of the last recession the quickest, are those that had built up strong rainy day funds that they could rely on when times were tough. Our proposed surplus is only 2 percent of our budget, it’s $750 million. The rate we should be trying to get to is about 6 to 8 percent of our budget.
Vannozzi: Madame treasurer, you mentioned a rainy day, so quickly before we have to wrap up, the black cloud that inevitably hangs over the budget every season is the unfunded pension liability. It’s a $3.2 billion contribution this year. It’s still not enough, according to most actuaries, to get the state on track. So, quickly for us if you can, what’s the long-term plan here?
Muoio: The long-term plan is we’ve got to make that pension payment. That has to be made every year and it’s going to ramp up. There’s no if’s and’s or but’s about that. So we are going to have to make sure that we can make that payment. We will not be able to do that without revenue sources to enable us to do that. A Pew study just came out yesterday talking about part of our issues is the unfunded portion of our pension that puts us at risk, and it’s looked at New Jersey as one of two states that are at real risk of being in trouble when the next economic downturn comes. We have got to start making tough choices and raising the revenues necessary so that we can meet our fiscal obligations, not just this year, but working out into future years.