Budget panels approve $58.8B spending bill in late night votes

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The Legislature is scheduled to give formal approval to the $58.8 billion spending bill on Monday. (Dana DiFilippo | New Jersey Monitor)
Budget panels in both chambers of the Legislature in late-night votes Friday approved an annual spending bill that Senate Democrats have said will cost $58.8 billion.
Legislators' proposal spends more than the plan Gov. Phil Murphy unveiled in late February, leaves the state with a surplus too small to meet a statutory requirement for a new tax relief program, and expands New Jersey's deficit to $1.5 billion (Murphy proposed $1.2 billion).
If the budget stands at $58.8 billion, it would amount to the highest level in state history. The full Legislature is expected to give the plan a final vote on Monday. The next fiscal year begins Tuesday.
Sen. Teresa Ruiz (D-Essex) on Friday read aloud a statement from an absent Sen. Paul Sarlo (D-Bergen), the Senate's budget chair.
'This is a budget that will help move New Jersey forward in the face of difficult fiscal conditions and severe economic uncertainty. We are making the best use of resources to address the priority needs of the state's residents in a fiscally responsible way,' the statement read.
On net, lawmakers' changes to Murphy's proposed budget add $728 million in spending beyond what the governor sought, and while the total effect of their revenue raisers was not immediately clear, the state appears poised to take in less money from recurring revenue than under the governor's proposal.
Republican officials, in what has become a yearly rejoinder, criticized the late-night budget votes, which were held before bill text was available to the public. Members of the press received copies of the spending bill at 8:37 p.m. Friday, but the bills were not posted online Friday.
'It's the complete opposite of what good government looks like,' said Sen. Tony Bucco (R-Morris). 'Their rushed, opaque budget charade is exactly why New Jersey is in the fiscal mess we've found ourselves in. There's no accountability, no planning, and absolutely no transparency, just last-minute deals and political favors pushed through in the dead of night when no one is looking.'
Friday's vote by the Senate's budget committee capped an unusual process that began when the panel met on Thursday but ended its meeting without a vote on the budget. Instead of adjourning, the committee took a 24-hour-long recess that allowed members who would not be present Friday, like Sarlo, to record their votes early on a budget bill that did not yet exist.
Witnesses and lawmakers praised the budget's full $7.2 billion pension payment, and the more than $12 billion it sets aside for formulaic school aid. However, some expressed concern that the state would still spend more than it brings in.
'I appreciate the responsible side of this budget where it's full pension payment, it's a full school aid payment, a healthier surplus than we're used to, but there's no signs of the structural reforms we truly need to give our next governor a healthier budget,' said Chris Emigholz, chief government affairs officer for the New Jersey Business and Industry Association.
Assemblywoman Eliana Pintor Marin (D-Essex), her chamber's budget chair, said the state's next governor, who will take office in January, would need to determine whether some programs should be jettisoned. Murphy is barred from seeking a third term in November.
'Whoever comes in, I think that there's going to be some decisions that are going to have to be made. I think whether it's a Republican or a Democrat, they're going to have to take a look at especially some of the senior proposals just to see what we can do,' she said.
Much of the new spending comes from legislative add-ons — variably called district spending, Christmas tree items, or simply 'pork.'
Those items are numerous and varied, and their costs total in the hundreds of millions. They include millions in capital funding to individual school districts, like the $21 million Newark schools will receive, or for local infrastructure projects, like $8 million set aside for roadway improvements in Camden.
Other changes would undo cuts to college financial assistance for students and reverse a $20 million cut Murphy proposed to community colleges' operating aid. Those cuts had rankled lawmakers and spurred alarm from university leaders.
The budget would pull an additional $70 million from the state's clean energy fund to pay for salaries at NJ Transit, plus an additional $50 million to underwrite more general state spending. NJ Transit was already set to receive a separate $70.1 million from the fund as part of an annual diversion.
The bill assumes the state will find $100 million in savings on state employees' health care benefits in the first six months of 2026, though it provides no suggestion for how officials realize such savings. Instead, it asks state and public employee representatives to each submit their own plans.
The boosted spending would take the state's surplus to $6.7 billion, according to budget documents that had not undergone technical review by the Office of Legislative Services.
Lawmakers augmented reserves by increasing a diversion from a debt defeasance fund — which is meant to reduce debt payments by immediately paying debt down or avoiding it altogether — to $555 million, from $250 million.
The proposed level of surplus should trigger a statutory provision to pause payments from Stay NJ, a nascent property tax relief program that promises to cut seniors' property tax bills in half. The provision is intended to halt the program if the state doesn't have enough money to pay for it, but lawmakers have previously overwritten it.
The budget includes a range of new or increased taxes, including a hike to rates paid on cigarettes, electronic cigarette fluid, high-dollar property sales, and casinos' online wagering wins.
Lawmakers followed Murphy's lead on nicotine taxes, exactly matching proposals he made in his budget message, but approved lower tax rates for casinos' online wagering wins than the governor had sought. Those rates rise to 19.75% in lawmakers' budget plan, rather than the 25% Murphy pitched.
Legislators made broader changes to a surcharge on realty transfers of more than $1 million.
Rather than doubling that tax rate to 2% and imposing a 3% rate on property sales worth more than $2 million, legislators voted to raise rates to 2% for sales worth between $2 million and $2.5 million and increase them by an additional half percentage point for every $500,000 in additional value, to a cap of 3.5% at $3.5 million.
Their proposal also calls for property sellers, rather than buyers, to pay the fee, a change that would decrease upfront costs for those buying buildings worth at least $1 million and reduce the profits from such property sales.
Legislators eschewed some taxes sought by Murphy. They skipped a proposed 10% hike to the state's alcoholic beverage tax that was forecast to boost collections by $18.5 million. They also declined to enact a per-truck warehousing fee estimated to generate $20 million in revenue.
A degree of uncertainty remains around the budget. GOP lawmakers in Washington, D.C., are exploring broad changes to federal programs that could pull billions in federal Medicaid funding, among other things, from New Jersey.
'In many ways, this budget may be a hypothetical document,' said Peter Chen, senior policy analyst at progressive think tank New Jersey Policy Perspective. 'When those cuts start coming, we'll have to come up with the revenue somewhere. Otherwise, we will face devastating cuts to many of the programs that we all hold dear.'