TRENTON — Gov. Phil Murphy signed a $38.7 billion state budget on Sunday, using his line-item veto power to cut $48.5 million in spending items and promising to freeze up to $235 million in other costs until he is convinced the state will have enough revenue to support the added expenses.
Delivering the news in a bizarre and raucous press conferences in Trenton, where he pointed his finger directly at lawmakers as Senate President Steve Sweeney stood just feet away, the governor continued to complain that he had to accept a plan that doesn’t include his proposed millionaire’s tax and cuts several items he had asked for in March.
But he also secured nearly all of the other proposals he laid out in his original budget — plus $50 million more for NJ Transit — and said he was left with a bittersweet taste in his mouth.
“While progressive change is taking hold all across our country, Trenton largely remains a holdout,” said Murphy, joined by labor leaders and other allies, in prepared remarks delivered via teleprompter. “Have no doubt, change is coming to Trenton, and I invite all those willing to join us. But for those stuck in the failed ways of the past — we’re moving forward. So, this budget makes progress and, at the same time, it also falls short.”
Negotiations between the front office and Democrat-controlled Legislature were nearly nonexistent this year, with neither Murphy nor lawmakers requesting a sit-down after the budget passed the Legislature on June 20. The disinterest in brokering a deal struck many observers as odd in a state capital where the annual budget process has become a key opportunity for wheeling and dealing.
Murphy chose instead to hold press conferences around the state to complain about items lawmakers cut, aggravating Sweeney, who accused the governor last week of having a “tantrum.” Even so, Murphy repeated those same comments on Sunday as Sweeney stood nearby.
“I ask you again: Whose side are you on?” Murphy said, repeating the question several times before the end of the press conference, which felt at times like a campaign rally. “Time and again, the status quo forces in Trenton took the wrong side.”
The final budget, which Murphy said he signed before the press conference began, includes an $875 million undesignated surplus and an additional $401 million deposit into the state's rainy-day fund.
Murphy slashed the Legislature's revenue estimates by a net $213 million, taking into account some adjustments the state treasury made to its predictions based on June revenue collections. Much of that is accounted for by a boost in assumptions about the corporate business tax.
Still, the governor said he was not confident in the predictions included in the final plan, fearing an economic downturn could be close. Murphy said he will order the state treasurer to impound as much as $235 million in spending items.
The governor’s office said Sunday it did not yet have a list of items that will go in the lock box and also could not say precisely what conditions would need to exist for the money to be released.
Murphy said the items are “things we overwhelmingly want to do” but, first, need to ensure revenue comes in as expected and other expenses don’t rise.
“Assuming we get some combination of that, we’ll try to free those resources up as best we can,” the governor told reporters.
The move, which relies on Murphy’s sweeping power to halt spending without the approval of the Legislature, likely makes it impossible for lawmakers to stop him from holding up the spending.
The governor also took direct action to reject several other items added by lawmakers, including those with ties to South Jersey's political machine.
Murphy’s line-item vetoes include $38 million that was dedicated to support shared services and school district consolidation, leaving $10 million for the cause. The issue is one of Sweeney’s top priorities.
Murphy also cut a $5 million line item that would have provided a vulnerable communities access-to-care grant to Cooper University Hospital in Camden, which is chaired by South Jersey Democratic power broker George Norcross. A senior administration official said the Legislature had not provided a "clear justification for the funding, nor is there a program description associated with it."
The governor also vetoed $4 million lawmakers added to support school choice, under the belief the total was incorrectly calculated; $1 million for East Orange General Hospital, because the state is providing support through a separate appropriations; and $500,000 for Rutgers University-Camden to conduct a study in collaboration with Cooper's Ferry Partnership.
Sweeney, who showed up uninvited to the governor’s press conference, said he thought the budget lawmakers passed was “sound, healthy and fair,” and “deals with a lot of issues of importance.” He said he thought the governor’s veto of funding for Cooper was “punitive” and “took money away from poor people in Camden that need health care.”
“We see how he goes with this stuff,” Sweeney said at his own press conference down the street at the Statehouse.
Sweeney said he was fine with the governor’s decision to impound spending until revenue arrives. He also said the governor largely preserved lawmakers’ spending priorities. But he rejected the governor’s definition of the middle class and seemed irritated by Murphy’s tone.
“When the governor says, whose side are we on? Whose side are you on? I’m on the side of all nine million people in this state, not just some,” Sweeney said, suggesting the governor was mainly looking out for public employees.
In total, the $38.8 billion budget passed by the Legislature this month included $368 million in spending on top of the governor’s original proposals. That included $100 million in so-called legislative add-ons — “pork,” the governor called them, despite preserving much of it in his budget.
There was another $173 million for “property tax relief” programs — including the shared services and school consolidation funds Murphy line-item vetoed — as well as $65 million to support wage increases for child care and health aides and another $50 million for NJ Transit.
In addition to lacking Murphy’s coveted millionaire’s tax, the Legislature’s plan cut new fees or taxes on gun owners, opioid manufacturers and companies whose employees rely heavily on Medicaid.
Lawmakers also cut some spending Murphy had sought, including a $250 million property tax credit the governor proposed last month, $30 million in supplemental school aid to Lakewood and $28.5 million from the governor's effort to boost community college aid.
While Murphy has no power to add revenue or appropriate spending, the governor’s office said it believes the funding for Lakewood schools will be needed in the coming year and played a role in the decision to freeze some spending.
The unusual budget process this year comes against the backdrop of an unprecedented civil war within the Democratic Party in New Jersey that pits Murphy against Sweeney, Norcross and others allied with them.
While they managed to get a budget done on time, averting a government shutdown, the state’s corporate tax incentive programs are still set to expire at midnight Sunday. There is little chance of a deal on that front, with both Murphy and the Legislature holding dueling hearings to examine the program and Norcross suing Murphy over the effort.
Just as Murphy appeared to take several shots at the Legislature during his press conference, Sweeney returned fire on the governor, saying he thought the governor’s remarks were designed to spin a political loss into a win.
“This actually reminds me of Donald Trump in some ways,” Sweeney said at his press conference. “He declares victory if he doesn't get his way. That’s a little of what happened today.“