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Governor signs 2019, Legislature-backed budget

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Lt. Gov. Sharon Oliver, Assembly Speaker Craig Coughlin, Gov. Phil Murphy and Senate President Stephen Sweeney hold a press conference on the budget agreement Saturday, in Trenton.
Lt. Gov. Sharon Oliver, Assembly Speaker Craig Coughlin, Gov. Phil Murphy and Senate President Stephen Sweeney hold a press conference on the budget agreement Saturday, in Trenton. - ()

Gov. Phil Murphy signed a $37.4 billion fiscal 2019 spending plan and some related tax increases, just before midnight on Sunday night, marking an end to a weeks-long budget battle filled with press conferences and chest-puffing.

Lawmakers approved the budget Sunday evening. One day elapsed between the budget deadline and the governor’s signature, during which the racetracks, casinos, state parks and beaches remained open. No government shutdown transpired.

“This deal implements almost all of the investments in New Jersey’s future that I recommended to the Legislature in March,” Murphy said.

Both sides had, for weeks on end, butted heads over dueling tax increases. Murphy wanted a millionaires’ tax and to increase the sales tax to 7 percent. Senate President Stephen Sweeney, D-3rd District, wanted a 13 percent corporate business tax. Neither, until recently, wanted to budge.

But on Saturday evening, Murphy and legislative leaders announced they made a deal on the 2019 spending plan.

Senate President Stephen Sweeney, speaking to reporters Sunday, in Trenton.
Senate President Stephen Sweeney, speaking to reporters Sunday, in Trenton. - ()

“This agreement will bring about strong and fairly funded public schools, modern reliable mass transit and, more importantly, fairness for our working families and middle class,” Murphy said.

In its compromise form as finally hammered out, the fiscal 2019 budget is expected to end June next year with a $765 million surplus.

The budget calls for a corporate surcharge of 2.5 percent for two years and then 1.5 percent for two more years, which Murphy said will raise $425 million in the coming year.

A “combined reporting provision,” which dragged Sunday’s budget voting sessions the next day on for 12 hours, prevents corporations from being able to move money to entities in other states to avoid taxation. It does that by looking at the corporation’s overall profits, rather than those of New Jersey-based entities only.

That provision is expected to bring in $200 million a year, while a one-time tax on money that New Jersey-based entities move from overseas, is expected to add another $200 million to the state’s coffers.

“The corporations that [President Trump] gave billions of dollars to are finally going to give their fair share,” Sweeney said.

But business lobbyists took to the statehouse throughout Sunday to voice their concerns.

“[Combined reporting] would make our state so much more uncompetitive,” said New Jersey Chamber of Commerce President Tom Bracken, who added the measure would “impose a tax liability on some of the large corporations who have multiple facilities in and out of the state.

“I’m hoping that we can move forward in a path where we all realize that we can’t get anything done without each other."

-- Senate President Stephen Sweeney.

Meantime, Murphy agreed to a “millionaires’ tax” threshold of $5 million, a concession sought by Sweeney. The tax rate will garner $280 million annually, Murphy said.

Murphy, who originally had wanted the tax on incomes $1 million and up, also agreed to withdraw a proposed boost to the state sales tax. That means the rate will stay at 6.625 percent, rather than the 7 percent rate Murphy had been backing.

“I was thrilled that we had stopped the sales tax from going forward, because that was $700 million that was better served in people’s pockets than in the government’s pockets,” Sweeney said.

Lawmakers staked out in the statehouse for 12 hours while legal counsel from both the Legislature and Governor’s office ironed out the language on the combined reporting provision.

Assembly Speaker Craig Coughlin on Saturday.
Assembly Speaker Craig Coughlin on Saturday. - ()

Both the Assembly and Senate approved the measures by the end of the evening. As soon as the final budget vote was counted in the Senate, lawmakers broke out in applause.

“I’m happy that it’s over,” Sweeney said, following the evening session. “I’m hoping that we can move forward in a path where we all realize that we can’t get anything done without each other.

Lawmakers were initially hoping to schedule an emergency vote on Sunday but needed three fourths of the legislature’s members to do so, which meant winning over some Republicans.

When the Assembly GOP announced last week that they would not support an emergency vote, the governor and Legislature agreed to a conditional veto of both the 2019 spending plan and tax increases, after which the Legislature voted to accept Murphy’s conditional recommendations.

A variety of smaller taxes and fees also have been tacked onto the 2019 budget. Lawmakers are banking on $49 million from the taxation of revenue on adult-use cannabis, and $20 million from the expansion of the existing medicinal marijuana program. Even though there is no law in place to legalize, tax and regulate recreational marijuana, the tax rate won’t go into effect until Jan. 1, so lawmakers have time to sort out details.

But legislators did away with a proposed 5 cent plastic bag fee and a realty transfer fee, that is, a 1 percent fee on real estate sales over $1 million. The budget also does away with the summer rental fee, though it keeps the Airbnb fee, which will bring in $15 million a year.

Gov. Phil Murphy, June 25, in Trenton.
Gov. Phil Murphy, June 25, in Trenton. - ()

There is, however, a projected $17 million to be generated from a tax on vaping and $12 million from a 50 cent per ride tax on Uber and Lyft.

The budget also calls for $200 million from a tax amnesty program, which would allow delinquent taxpayers to file their penalties at a reduced rate. There may also be upwards of $188 million from the newly legalized practiced of taxing online purchases, which will begin Oct. 1.

The 2019 budget includes Sweeney’s proposed school funding plan, which would “equalize” school aid by transitioning state funds from “overfunded” districts to “underfunded” districts. The reduction from “overfunded” districts will take place over a seven-year phase-out, and no district will lose more than $3.5 million a year.

The budget also includes $242 million towards New Jersey Transit, an increase in the property tax deduction from $10,000 to $15,000, $83 million towards pre-school services and $20 million towards community colleges.

Here’s a breakdown of how lawmakers voted on the “budget bills.”

-          A3438, establishes tax amnesty period. Senate vote 26-12 and Assembly vote 56-14

-          A4061, imposes tax on Uber and Lyft. Senate vote 22-16, Assembly vote 41-29

-          S2824, 2019 state appropriations act. Senate vote 23-15, Assembly vote 41-23

-          A3088, earned income tax credit. Senate vote 24-15

-          A42616, establishes online sales tax. Senate vote 22-15, Assembly vote 44-27

-          A1753, establishes Airbnb tax. Senate vote 21-18, Assembly vote 41-29

-          A4202, increases the corporate business tax. Senate vote 23-15, Assembly vote 41-23

For more 2019 NJ budget:

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Daniel J. Munoz

Daniel J. Munoz

Daniel Munoz covers politics and state government for NJBIZ. You can contact him at dmunoz@njbiz.com.

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Tom Kole July 2, 2018 12:28 pm

What is wrong with us? I am completely flabbergasted that we are again raising taxes instead of cutting costs and giving away free stuff! Please stop the nonsense, suck it up and make us the successful State we once were instead of being one of the worst and the laughing stock of all!