Both the Assembly & Senate Budget Committees approved a new $34.1 billion state budget (A-3482 (Schaer) / S-2015 (Sarlo)) June 24. The budget bill makes several key changes to the budget proposed by the Governor back in February including the inclusion of the four-sevenths required pension payment as well as several new tax increases or elimination of business incentive programs, to balance the extra revenue required by the required pension payment. A full vote is planned in both houses on June 26.
NJSPA is asking members to contact their legislators NOW via our Advocacy Center to let them know that as members of the retirement system, as well as members of the community, you support this budget.
Background
In the usual June budget ritual in Trenton, lawmakers met late into the night last evening – approving the spending plan in party-line votes just after 11 p.m.
Both budget committees split along party lines before approving the legislation, with Democrats arguing the state must make the full pension contribution required by law or risk a series of downgrades from Wall Street credit-rating agencies and years of even sharper fiscal pain than the state faces today (the committee approved legislation makes the pension payment required by P.L.2011, c. 78 (4/7) in the fiscal year that begins Monday).
To pay for the increase, Assembly Speaker Prieto (D-Hudson) sponsored companion legislation that is also included in the budget that would raise the marginal tax rate on income above $1 million from the current 8.97 percent to 10.75 percent. The tax increase would expire after three years. A separate proposal sponsored by Assemblyman John Burzichelli (D-Gloucester) would raise the corporate business tax rate from 9 percent to 10.35 percent for one year.
Faced with a $1.7 billion revenue shortfall, Gov. Chris Christie had proposed cutting the pension contribution from $2.25 billion to $681 million. Shrinking the payment would dramatically impact the continued viability of the pension fund. The Governor argued that choice was better than the alternative: cutting funds for schools and hospitals or raising taxes. Christie has the power to reduce any pension payment Democrats include in the budget by way of his line-item veto authority. Shorting the pension payment by $2.4 billion over two years, as Christie wants, would cost $4.2 billion over five years, according to a recent Star Ledger report. The retirement system already faces $38 billion in unfunded liabilities, according to the administration.
The Governor had already proposed raising some new, smaller taxes and fees. But Republicans in the Senate oppose the governor on those moves and abstained from approving them Tuesday. They still passed with Democratic support.
Republican lawmakers and Sen. Jeff Van Drew (D-Cape May) voted against the raising the business tax. The millionaires' tax got straight party-line votes in both panels.
Assemblyman Declan O’Scanlon (R-Monmouth) proposed reducing funding for low-income school districts as a way to save enough money to pay New Jersey’s rapidly escalating bills. In the meantime, cutting the pension system is the only feasible option, he said.
Final passage for the budget and tax bills is expected Thursday in both houses.