Budget Season in Trenton: Never a Dull Moment

by Hoboken Strategy Group

As a regular reader of “From the Halls of Trenton,” you already know that June is without a doubt one of the most exciting months in Trenton.  This June has not been a disappointment to any and it’s not over yet!  Let’s get started.

Under the State Constitution, the State Budget must be approved by the Legislature and signed by the Governor before the beginning of the new fiscal year on July 1.   In February, the Governor proposed a $34.5 billion budget which includes a $1.86 billion pension payment.  The Legislature introduced a $34.8 billion budget which was approved along party lines on June 27.  Governor Christie has the final say on the Budget as a result of the line item veto granted to him through the State Constitution.

statecapAs a part of the State Budget, the Legislature advanced the Christie administration’s plan to delay the payment schedule for businesses awarded grants under the Business Employment Incentive Program (BEIP).  This legislation would revise the priority schedule to issue converted tax credits to the oldest, outstanding grant awards that have been accrued but not paid to businesses.  Under the bill, businesses would receive a tax credit that totals 5% of the amount of the grant in the first year, 20% of the total in the second year, and 25% of the total in the next three subsequent years totaling a hundred percent of the grant accrued.  The Governor’s Office has projected that this plan would save the State $135 million in the new fiscal year.

Last week, the Senate and General Assembly gave final passage to S-15/A-15 which would increase the hourly minimum wage to $10.10.  The legislation would increase the minimum wage over a four-year period to $15 per hour.  Also under the legislation, if the federal minimum wage is raised higher than the State, then the State minimum wage would be set to the federal standard and increases to the Consumer Price Index would be applied to the federal wage rate.   The bill is now on Governor’s Christie’s desk where it is more than likely to be vetoed by the Governor.   The Governor has 45 days to make a decision on the legislation or it would automatically become law.  For anyone who would be interested in weighing in with the Governor on this legislation could do so through the Governor’s Office: http://nj.gov/governor/contact/

The Legislature is also considering a measure that would place a constitutional amendment on the November ballot to mandate contributions to New Jersey’s public pension system.  The State’s pension system covering around 770,000 active and retired public employees is currently $43.8 billion in debt.  This constitutional amendment would require the State to make quarterly increasing contributions into the pension fund through 2021.  Proponents have stressed the need for this legislation to avoid the collapse of the pension fund while opponents have warned that the amendment would take funding away from important State programs. The proposed constitutional amendment has passed the Assembly and awaits consideration by the Senate.

After much fanfare and a long wait, legislators are debating the replenishment of the Transportation Trust Fund (TTF) which is scheduled to run out of money in the next fiscal year without legislative action. This past Monday, June 27, there was plenty of action.  An original bipartisan compromise called for significant tax reductions for New Jersey residents and businesses.  The proposed “tax fairness” plan included an increase in the Earned Income Tax Credit to 40 percent of the State’s working poor, an increase in the tax exemption on retirement income, a tax deduction for charitable contributions as well as a phase out of the estate tax. 

Since all tax increases much originate in the Assembly, the ball was in their court.  By mid-afternoon it became apparent that there not enough votes in the Assembly to provide a veto-proof majority for the plan.  After several hours of negotiations, Assembly Speaker Vincent Prieto and Minority Leader Jon Bramnick reached an agreement with the Governor on an alternative plan: the TTF would be renewed as described below, however the TTF renewal would be for an 8-year period rather than a 10-year period as originally proposed.   The only tax cut from the original plan that remained was the income tax cut for retirement income which was joined by a new plan to reduce the current 7% sales tax.  Under the compromise, the sales tax would drop to 6.5 % on January 1, 2017 and fall again to 6% on January 1, 2018.  

The proposed $16 billion plan authorizes $15 billion in bonding authority and includes $500 million per year of “pay as you go” funding.    The TTF plan calls for a 23-cent per gallon increase in the gas tax which would result in a total 37.5-cent per gallon cost.  Proponents have touted that this tax would still be lower than neighboring states including New York, Connecticut and Pennsylvania.  In addition, an estimated 20 percent to 35 percent of the tax would be paid by out-of-state motorists.  The tax would be capped at three dollars, meaning the surcharge would not be applied to sales above $3 per gallon.

The renewed Transportation Trust Fund plan calls for a $2 billion per year investment for 8 years towards repair, upgrade and maintenance of the State’s roads, bridges, tunnels and railways.  Sponsors of the TTF plan calculate that the increased funding would produce an estimated $4.7 billion per year in economic activity, creating 34,000 jobs with annual payrolls of $1.4 billion.  Further, each dollar spent from the TTF generates $2.35 in economic activity.  The plan would also provide up to $400 million annually for counties and municipalities as well as $28 million to create a Transportation Infrastructure Bank which would provide low-interest loans for local governments.  In order to address previous concerns of TTF funds being used for other purposes, voters will be considering a constitutional amendment on this year’s general election ballot in November which would dedicate all gas tax revenues for transportation infrastructure projects.

While the Assembly approved the TTF agreement overnight on Tuesday and Governor Christie has pledged to sign this compromise bill, the Senate adjourned for the day prior to consideration of the legislation.  The Senate is scheduled to return to Trenton on Thursday, 6/30 for a voting session.  Senate President Stephen Sweeney has given no indication as to whether he is willing to support the proposal.  It should be interesting!

It’s an exciting time to be in the Halls of Trenton.  Stay tuned!  We will fill you in on all of the happenings in our next issue!

Hoboken Strategy Group is a boutique New Jersey government relations and business development firm made up of public affairs professionals with years of experience handling legislative and regulatory issues on the local, state and federal levels.  Kay Elizabeth LiCausi, President of Hoboken Strategy Group, serves on the Government Affairs Committee for the Hudson County Chamber of Commerce.  Michael J. Comba serves as Vice President of Hoboken Strategy Group.  They can be reached online at www.hobokenstrategy.com and on Facebook at Hoboken Strategy Group.

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