Senate Budget GOP Releases Letter to Fix Murphy’s Broken Budget

May 22, 2024

Republican members of the Senate Budget and Appropriations Committee submitted a letter to the Senate President and Assembly Speaker outlining comprehensive changes to the Governor’s FY25 budget proposal.  

Senate Republican Budget Officer Declan O’Scanlon (R-13), Senator Michael Testa (R-1), Senator Doug Steinhardt (R-23), and Senator Carmen Amato (R-9) called on the governor and Trenton Democrats to work with Republicans to control spending and lower taxes. The letter highlighted two previous Republican budget proposals (FY24 budget resolutions and FY23 budget resolutions) that contain relevant solutions to address the overwhelming waste and excess that has exacerbated New Jersey’s affordability crisis.

“Our past budget resolutions sought additional tax relief, a full restoration of school and municipal aid, and financial support for various service providers — all of whom have been struggling due to New Jersey’s affordability crisis,” said the Senators in their letter. “We also proposed how to more-than-pay-for these priorities to help address budget imbalances and increase funding for debt reduction. Our ideas for improving the budget have almost been entirely ignored by the Democrat Majority.”

Key takeaways from the letter:

1. Proposes a budget that controls spending and encourages Democrats to review comprehensive Republican solutions that they largely ignored in the past;
2. Prioritizes tax/fee/fare relief, fully restores school funding for districts that were cut, and supports various service providers; and
3. Offers sensible reductions, restraints, and reforms that would save taxpayers billions of dollars.

You can read the full letter below: (Click here to view a PDF)

Dear Senate President Scutari and Assembly Speaker Coughlin:

In prior years, Republican members of the Senate Budget Committee submitted 40-50 page “budget resolutions” that set forth comprehensive changes to the Governor’s budget proposal. Rather than submit another one, we encourage you to finally give serious consideration to the last two submissions – and the general approach to budgeting they embody. They can be found here and here and contain many still-relevant suggestions that have long gone ignored by the Governor and the Democrat Majority.

Our past budget resolutions sought additional tax relief, a full restoration of school and municipal aid, and financial support for various service providers – all of whom have been struggling due to New Jersey’s affordability crisis. We also proposed how to more-than-pay for these priorities to help address budget imbalances and increase funding for debt reduction.

Our ideas for improving the budget have been almost entirely ignored by the Democrat Majority – though there has been bipartisan support for programs that support a broad array of service providers who care for people who are sick, disabled, or face extraordinary challenges. Nonetheless, the Majority has repeatedly introduced and enacted budgets in late June with no substantive restraints to spending proposed by the Governor, which budgets have included an additional billion dollars of spending for politically favored projects that are never explained – even though Joint Senate/Assembly Rule 42 requires a release of explanations prior to a vote.

As in the past, we continue to believe the Governor’s proposed FY 2025 Budget can be made fundamentally better in the areas of tax relief, school and municipal aid, and financial support for various service providers. Similar to our prior more detailed budget resolutions, we continue to advocate for the following priorities.

1. Provide Tax/Fee/Fare Relief: OLS has identified $2.6 billion in tax/fee/fare increases in the coming year. There are increases in: highly regressive employee wage taxes, NJT fares, and highway tolls; the income tax (bracket creep); HMO insurance taxes; a new truck tax; taxes on school supplies (ending the sales tax holiday); and a new corporate surcharge claimed to be for NJ Transit when 100% of the revenue is being diverted to everything but NJ Transit. In addition to stopping as many of these tax increases as possible, we continue to support an income tax deduction for contributions to NJ-based nonprofits. This will reduce tax burdens, and more importantly, shift more charitable giving away from out-of-state institutions, and towards NJ-based charities whose health is critical for our State.
2. Fully Restore Aid Cuts to Schools and Municipalities: The Governor proposed cutting school aid to approximately 150 school districts despite a badly broken school funding formula, high inflation, and the need to address learning loss. He also proposed slashing municipal aid to all municipalities which are raising property taxes or reducing local services to address inflation and State billing increases for pensions and health benefits.
3. Provide Additional Financial Support for Various Service Providers: The Governor shortsightedly and arbitrarily cut funding for county colleges, independent universities, battered women’s services, and other Statewide and regional service providers. And, as with past years, the Governor has withheld reasonable inflationary increases for various service providers that will cause them to lose ground in times of high inflation and staffing challenges and trigger service reductions to vulnerable populations. We strongly support restoring these cuts and meeting requests for reasonable increases that have been advanced by service providers including: mental health managed care organizations and other mental health service providers; ACCSESNJ, Easter Seals, ARC, and other advocates for people with disabilities; the Coalition Against Sexual Assault; hospitals; nursing homes; Hispanic service groups; cancer research facilities; smoking cessation programs; manufacturing/stem (science and technology) advocates; home health care workers and private duty nursing providers; nonpublic and charter school advocates; and the Commission on Science Innovation and Technology. It’s frustrating year after year to see a Governor’s budget proposal that fails to help these efficient partners in service delivery when much of their inflation is mandated by the State in terms of minimum wage increases, new benefit requirements, and payroll tax increases. Failing to support their reasonable requests for increases equates to cutting the nonprofit sector, which delivers important services to people when the State can’t, or would do so less efficiently. We expect that you will again be supportive in this area.

Importantly, we continue to advocate for approaches to more-than-pay for those of our priorities you choose to accommodate. Embracing our previous proposals that more-than-cover the cost of accommodated priorities is critically important because the Governor’s proposed budget spends far more than it brings in by way of recurring revenue. Though prior resolutions offer more detail, our proposals are more generally summarized below.

1. Limiting unsustainable program creations: In the past, we urged restraint. We warned that many new programs should not have been undertaken because they were unsustainable. Though supportive of some compelling and reasonable new initiatives, we warned against creating new taxpayer-funded programs, including: new programs to force taxpayer subsidies of wind farms; new programs to force taxpayers to fund 100% of college education; new programs to force taxpayers to make the down payments on some peoples’ home purchases; new programs that force taxpayers to pay the legal costs of illegal immigrants fighting Biden Administration deportation; a new $150 million per year program to force taxpayers to fund health insurance for illegal immigrants without any premium sharing or copays; and new programs that force taxpayers to fund cash welfare payments to previously excluded convicted drug dealers.
2. Controlling/moderating spending excesses: In each of the past two years, more than $1 billion was added at the last minute to give grants to named governments and some nonprofits with no public explanation or justification being provided to this day. The most glaring abuse has been allocations of funds to Jersey City to build a French arts museum. Reports have documented it as being grossly excessive, wasteful, and fueling pay-to-play contracts. In fact, at least $52 million of those funds remain available in State accounts and carry forward into the next fiscal year, despite no public support. Other larger special projects that have never been justified or explained and people throughout the State should not be forced to pay for them. These line-items include tens of millions of dollars to each of a handful of local government authorities where Comptroller reports, audits, and news reports have cited unlawful procurement, excess and waste. In total, hundreds of millions of dollars from hundreds of never-explained special line-items ought to be reallocated. In addition to old balances, which can be redirected, the Governor proposed dozens of new special line items for FY 2025 based on favoritism that he and his cabinet have refused to explain. They, too, ought to be reallocated. Finally, we strongly encourage that special line-items for projects be limited in the upcoming appropriations act to those that have public and thorough justifications and are free of excess. Many of our members will individually submit budget resolutions for items they think warrant support in the absence of open and competitive programs that we have preferred, and their budget resolutions with explanations and justifications will be released well in advance of the introduction of this year’s budget – just as Joint Rule 42 requires. We hope that your members’ requests are similarly explained and justified, and that your decisions on what to grant will be fair and balanced – and made in tandem with an opportunity for public vetting and input.
3. Adopting program reforms: There are a number of State programs that are important and worthy of strong support, but that are simply in need of basic reforms that would save money. For example, we have long supported the return to making full pension payments, though we have advocated ending obvious pension abuses that would help control the cost. For example, we proposed eliminating grandfathered abuses under previous preforms that still allow many public officers and employees to get full time pension credit (and/or health benefits) for part-time work. There are still governing boards and agencies that meet as infrequently as once a month with members entitled to full-year pension credit and/or health benefits for as little as $1,500 of work per year. We have advocated embracing public employee union proposals to control health care costs to save taxpayer money – and to save money for public employees who share in paying for premiums. We have advocated for Treasury to finally claw back more than $40 million in well-documented overpayments to hospitals in 2020 – while Treasury simply refuses to explain if they are even trying to collect the money. We have advocated using Debt Defeasance and Avoidance money in ways that the nonpartisan OLS advises would save three times the savings generated by Treasury’s approach. We have advocated these and many other cost-saving reforms.
4. More smartly generating additional revenue: We have suggested a number of efforts to generate additional revenue. The two explained below stand out as having been grossly ignored for no good reason. The failure to aggressively pursue them seems attributable to little more than bureaucratic inertia. It’s costing the State up to $1 billion annually. Meanwhile, as OLS notes, more than $2.6 billion of tax and fee increases are being lazily advanced.
   1. For many years a bipartisan coalition of Senators strongly advocated increased efforts to combat New York’s unfair and gross over-taxation of New Jersey residents – with every dollar of New York’s money grab overtaxing our residents and reducing New Jersey’s share of revenue. Among other strategies, we advocated that New Jersey file suit against New York, leverage power over bi-state agreements, and create incentives for New York employers to create offices in New Jersey and/or reassign New Jersey resident employees to New Jersey offices. All of this would result in New Jersey – and not New York – receiving income tax collections – at rates for taxpayers less than New York charges. Legislation supporting only some of these strategies was finally enacted a year ago, and EDA only recently began to implement some of its tepid provisions.
   2. Treasury has resisted changing rules and policies that would allow the State Investment Council to smartly move some of our $40 billion Cash Management Fund (CMF) out of lower-yielding short-term Treasury investments and into higher-yielding, and equally safe, short-term New Jersey local government notes. The State would receive 2-3% better investment returns on billions of dollars of investments. Local governments would also benefit because (1) some invest through the CMF and would get better investment returns; and (2) those that issue short term notes would experience reduced interest rates from more competition for buying their debt – especially distressed local governments like Newark and Trenton, which are charged very high interest rates to borrow money. Finally, by adding CMF as a buyer of local short-term debt, it will help ensure local government access to credit when there is another private credit crisis like the one that occurred in 2008 and 2009 and the one that began to emerge (but was narrowly avoided) with the onset of COVID. At our final budget hearing, the Director of the Division of Investment embarrassingly excused the State’s inaction. He claimed additional investment risk even though there’s been no substantive default in NJ local government notes in 100 years because New Jersey does not allow local defaults. He claimed the 2 or 3% better investment returns weren’t worth the “additional risk” — apparently not able to comprehend that 2% or 3% better rates of return on billions of dollars is nothing to sniff at, and could fund all sorts of the priorities we identified above. Finally, he oddly cited the need for liquidity even though short term local notes have maturities of less than a year – just like Treasuries. The real reason this is not being done is because it is far easier for the Division to buy Treasury investments with a click of a few buttons than spend the time and resources to bid on individual local note sales.

Had our prior proposals to control spending and generate additional revenues without increasing taxes been taken seriously years ago, we are confident all our priorities could be addressed. It’s not too late for you to finally take our proposals seriously, and fund the bulk of our priorities this year while reducing the State’s structural imbalance. We stand ready and willing to work with you to develop a truly bipartisan budget.

Sincerely,

Declan O’Scanlon, Jr. 

Michael Testa, Jr. 

Doug Steinhardt 

Carmen Amato, Jr.