Eight months into the first year of his first term, Gov. Phil Murphy has stayed true to his campaign priorities and enacted a progressive agenda not seen in New Jersey in several years.
Whether it’s kick-starting the innovation economy, raising the minimum wage or legalizing marijuana for recreational use, the Murphy administration has wasted little time in moving forward on these and a host of other issues.
NJBIZ Government Reporter Daniel J. Munoz recently spoke with the governor to get an update on where these and other matters of critical importance to the state currently stand – and where they may be headed.
NJBIZ: One of the things we’ve been talking about are the pension and health care reform initiatives that were outlined in a recent report from a blue-ribbon panel commissioned by Senate President Stephen Sweeney. Can you talk about what we can expect from your administration as far as working with him on these recommendations?
Gov. Phil Murphy: So, it’s probably too early to tell. I read with great interest the list of items that came out of his group in the report they put out, some of which we are very anxious to work with him on. … Some others are more complicated … but you can probably put them into a variety of categories. At least one category would be called “very complicated.” One of the things, one of the areas, obviously, that’s complicated is both pension and health benefits, and I separate the two.
They get lumped together. In fact, I myself chaired the original commission on this 13 years ago and we lumped them together, our review of the pension and health care benefits for state employees. So I’m guilty of the same lumping together. But I see them as separate items.
On the health care side, we’ve already stood up a commission. Now probably a couple months ago. That commission is meeting. It’s got representatives from a variety of walks of life, including the public sector unions themselves, health care experts, folks from all sides of the issue. And we think there is real opportunity to save meaningful money and to do it in a way which does not harm the participants.
If anything, we think there are so-called “Holy Grail opportunities” where the state saves money, the individual may save money and the health care coverage is at least as good as it was before. And so I don’t have a dollar sign on that. These are things … where you’ve got to get the folks who are impacted and the representatives at the table working on it with you. And I think that’s going to yield some real significant fruit.
The pension side I’ve got more of an issue with because even the commission put together by Gov. [Chris] Christie a couple of years ago concluded that the pension shortfall is the state’s fault. And so … this can has been kicked down the road, and I still feel quite strongly that the participants did what we asked them to do, [but] we didn’t do what we promised to do.
And so, there’s a level of trust that needs to be reinstated, and so we made the largest pension payment in our budget in the state’s history, and so I think we need to continue to make the statement with our actions, and not our words, that we’re good for it. Now the last comment on pension, which is important to note, there’s lots of people out there, and I don’t disagree, who could blame them, [that] would like to see the pension payment percentage of our total budget go down.
Count me in, I want the same thing to happen. But, here’s the biggest issue with this. If you have got a group of people who didn’t do anything wrong and they’ve been doing what they said they would do, and you’ve got a flat, dead-in-the-water economy where we have left tens of billions of dollars of economic activity on the table, my way of reducing the pension payment as a percentage of the revenues of the state is to grow the darned economy again, do what we used to do really well – which we’ve gotten off of doing over the past decade – which is to grow the innovation economy, grow the infrastructure economy, create jobs – the right kinds of jobs – and grow this thing again.
… When you look at how we’ve grown since the trough of the Great Recession, relative to any average American state or average group of peer states, we’ve left $20 [billion] to $50 billion of economic activity on the table. That’s probably $2 billion to $3 billion of state revenue, so instead of $37.4 billion, that’s a $40 billion revenue state. And you look at the pension payment of a percentage of 40 [billion] relative to 37.4 [billion], and then you look at what we could achieve going forward with realistic growth if we just grow sort of the way we used to, you then find the financial wherewithal to deal with the outstanding obligations.
NJBIZ: What are your thoughts about moving into a 401 (k)-style plan for state employees?
Murphy: Yeah, we looked at this in 2005 and we rejected it, and I continue to do so today. And I’ll let my prior answer stand as the context for that.
NJBIZ: It was alleged in some circles that the governor’s office wanted to be in the Sweeney group but was not invited. Could you shed some light on that?
Murphy: This is not an allegation. The Senate president, by the way, for all the noise around relationships, we’ve gotten a lot done with him, and in many cases he and I agree, and folks make a lot of noise around the areas where we don’t agree. There’s no allegation. He decided to put a group together on his own to study this. We were not a part of that, we did not get an invitation to be a part of that.
I have no problem with that, zero. We don’t have all the answers. He put a good group together. Just because we don’t agree with all their recommendations doesn’t mean we don’t admire and [have] respect for the group he put together, as well as many of the recommendations that I think are worthy of pursuit.
NJBIZ: Switching to the $15-an-hour minimum wage. What are the prospects that happening?
Murphy: Well I think they’re high, but it won’t happen overnight. … I think they’re high, [but] it’s going to need to be phased in. So, high in terms of legislation that will get on our desk for me to sign. I would hope that we could get something done this year. Now the wage, the minimum wage that is $8.60 [an hour], is wholly and completely unacceptable. It means even with a two-income household with two dependents, you’re well below the poverty line. We can’t let that stand in New Jersey in 2018.
The only thing that folks need to understand, the reason that you can’t go from $8.60 to $15 overnight, you’ve got to phase that in over a period of years. There’s too much sticker shock to do it at once. There are too many small businesses operating on thin margins. Food retailers would be a good example of that, and so that’s the one sort of point I want to make: We want to and we must get to $15 an hour, but it has to be phased in over a series of years. I’m optimistic that we’ll begin that process this year.
NJBIZ: Were you expecting the kind of backlash the proposal has gotten?
Murphy: Yeah, the answer is yes, and I respect their opinions, even if we don't agree on this. And I say yes because this is like a lot of things. We have governed as we campaigned. There are, I think people would largely agree, very few surprises with how we’ve governed in the first eight months relative to how we campaigned.
So I started talking about $15 minimum wage four or five years ago. In fact, I’ve talked about it a lot longer than that. … And so we’ve heard the arguments. I’ve spoken to the food industry myself. So we understand what the other side of the arguments are. In some cases, they’re legitimate enough for me to readily accept we need a multiyear phase-in. I accept that.
But there are other arguments that have been put up that are myths that we need to bust, [like] that it’s mostly teenagers [who are affected]. It’s actually not. It’s 90 percent of people over the age of 20. … It’s more women than men.
… I think if we were to raise it to $15 an hour, I think 25 percent of the people who would benefit have families, have children. And so, when you’ve got an $8.60 minimum wage right now and you are meaningfully below the poverty line, even in a two-income household that is completely and wholly unacceptable, and there’s no good argument against that.
Again, I’m prepared to phase it in over a period of years, but we’ve got to get to $15. … At $15 an hour, you’re barely above the poverty line for a two-income household with two dependents. So it’s not like you’re on easy street.
The other thing that is important to note … is when the wage goes up, [workers] contribute that incremental income right into the economy. So this contributes to economic growth as opposed to taking it away.
NJBIZ: Right, now it seems like raising the minimum wage has been part of a broader progressive Democratic push across the country. What do you say about the success of the progressive movement?
Murphy: …There’s no question where the heartbeat of our party is. But let’s not then instantly get to the conclusion that the Democratic Party has gone crazy left, that we’re irresponsible, that we’re not able to balance our books, etc. So I like where we are. Someone tagged me as a pro-growth progressive. I will take that. I’m proudly progressive, and by the way we don’t stand for things like minimum wage because it’s in vogue. We stand for these things because it’s the right thing to do.
But boy I’ll tell you something, am I proud to be progressive. I’m just as proud to be a pro-growth guy. Minimum wage and earned sick leave and equal pay and all those other things that we’re incredibly proud of, by the way. If you follow me around, I spend most of my time right now on economic development, growing this darn economy.
We have to do both, we have to prove to people that we can be both proudly progressive and they can trust us with economic growth, and that’s what we’re trying to do in New Jersey.
NJBIZ: I understand you’ve wanted to take a look at the Economic Development Authority’s tax credits, as the program sunsets next year. So, what do you imagine that’s going to look like, say July 1, 2019?
Murphy: Too early to tell, but we’re actually beginning to look at it as we speak. So this is something we’re not waiting to next year to look at. We’ve been looking at it quite intensely. We put an audit out in terms of just figuring out exactly what we’ve got for what we’ve already done, and we are already thinking through how we put together a set of incentives going forward that are consistent with the economy that we want to build.
And so it’s too early to tell. … By the way, economic incentives will be part of our recipe, there’s no question about that. … They’re a tactic, they’re not a strategy. They were a strategy in the last administration, that’s all they consistently used. They are an element of a broader strategy.
We’re focused on not only the big companies, the big employers here – and we care deeply about them – but we also care about, if we’re serious about the innovation economy, what we need to do to kick-start the dormant startup culture in the state.
I had a dinner with a bunch of Silicon Valley startups and some venture capital money … on this very topic. So you have already seen actions that we’ve taken as it relates to incubator incentives. You should expect we’ll be doing a lot more of that.
… In the meantime, I believe completely – and our budget screams this out – that the context for whatever program we put in place is going to be that nobody puts more resources into education and infrastructure than New Jersey does. I believe with all my heart that the extent to which we can dominate education from pre-K through higher education and get back to taking advantage of our extraordinary locations through infrastructure investments, in particular fixing NJ Transit. The extent to which we do that, we have created then the context of which you can put into the recipe book for how you aggressively grow the economy again.
NJBIZ: Where are we with marijuana and what are the main points going to look like?
Murphy: Too early to tell. We’re working with the legislative leadership [and] there’s been a lot of back and forth. Again, I’d say along with minimum wage, it’s something that I would hope very much that we could get this year. Both legislation, as well as signing it, and this includes, by the way, the broader notion of marijuana, which includes … legislation that we need to further open up the medical regime. It includes, obviously, adult-use marijuana. It includes the extent to which we must look back.
Folks use the term “broad expungement,” but that notion is important to us, so I’m optimistic. We’re not there yet. It’s not going to be easy because there remains some skeptics, which I understand. But we will get there and I’m optimistic, along with minimum wage, that we’ll get to each of them I hope this year.
NJBIZ: I understand the Legislature is at the point where they are just sorting out the legalese.
Murphy: We typically don’t comment on legislation that’s getting baked. So I would just would say that we’re working on it with the leadership in both chambers and we’re all committed. This is not one where we’ve got a big philosophical divide … but doing it right is really important to us. And that’s the point that I want to make. We want to get it done, but we’ve got to make sure it’s done right.
NJBIZ: You mentioned the innovation economy earlier. Since you recently picked a new chief innovation officer, what are your expectations from this position?
Murphy: Yeah, so it’s probably too early to get into the specifics of how I see that play out. But we’ve got extraordinary talent. Beth Noveck has basically done it all in the innovation space. And we’ve got a really good guy, Chris Rein, who’s doing this. He’s basically the CTO, chief technology officer, and Beth is the chief innovation officer, and the combination feels really good to us.
People say all the time, “well can you save money in state government.” The last administration gutted the employment ranks. The big opportunity, in our opinion, to save money is to be smarter in delivering services, state government services. And I’m really optimistic that that’s where there’s an enormous amount for us to take advantage of it.
It’s not just that. … Beth and I have sort of bonded under the same star, which is, she is an integral player as we think about the economy across the state and how we want to build it. And having somebody with her talent – who by the way has been in senior government positions – is very rare in the innovation space. It’s very rare to say this, on both sides of the Atlantic. She not only was a senior member of the Obama administration, she was then a senior member of the Cameron administration in the United Kingdom and she only a couple weeks ago got back from a very exclusive group that she’s a part of advising Chancellor Angela Merkel in Germany, so she has seen it at the highest levels.
So her being part of a team [is important], both as we think about how can we get state government meaningfully better in its delivery of services – more efficient – and can we save money. I hope all of the above. But also, how do we build this innovation economy in the smartest way and the fastest way and the best way. She’ll be invaluable in each of those capacities.
NJBIZ: You mentioned transit briefly. What’s next for New Jersey Transit?
Murphy: We’re still getting our arms around it. … We came through a pretty tough period, particularly in the late summer. You know we have to get positive train control achieved 100 percent throughout our system. We have no choice, the deadline is Dec. 31.
When we came into office in January, it was seven years [since] positive control first was established as a requirement for transit systems, and in seven years we had achieved 13 percent – one-three percent – of the objective. We’re now well over 60 percent in only less than eight months and I’m really proud of that. The problem is it comes at a cost because you have to take the cars and the trains offline to do the technology work that you need to comply.
That’s why we had to make the tough decision to shut the Atlantic City line for several months. That’s why we’ve had cars offline that have frustrated commuters, and who the heck can blame them? They’re mad. I’m mad too. Long story short, positive train control is job No. 1. I’d say alongside that, the other focus that we’ve got [is] we’ve got to rebuild the ranks of engineers.
The prior administration had cancelled classes, it furloughed classes. You know, we need 291 engineers to make the show go on a weekday and we used to have well over 400. We’ve only got 330-something. That number has got to get back up and you know, you’ve got to train these folks. And so we’re doing an audit right now which is also looking at the training regimen and how we can be smarter about that.
We’re also pursuing at long last the folks with non-New Jersey residency … who have relative experience so that they can be trained more quickly. So that’s another piece we’re pursuing. And I’d say thirdly, we need to communicate better. And there’s been significant improvement over the past few weeks. It needs to continue to improve. To let any commuter, whether it’s rail or bus, anywhere in the state, know as far in advance, as clearly as possible, any issues that might be coming up.
I’m optimistic about all of the above. We finally funded it in a real way, we put real people in who know transit to run it. The mess that we inherited was bigger than I think any of us thought, but we are going to get through this. We will get back, this system will get back, to where it needs to be. I’m completely confident on that.
NJBIZ: Have you talked directly to President Trump about the Gateway project?
Murphy: Yes, I spoke to the president when he congratulated me when I won. We spoke about infrastructure and Gateway, and we spoke in person at the National Governors Association [meeting], and I continue to be optimistic. I’m very frustrated, because it’s so obvious what we should be doing here. And the president is from New York, he’s got deep interests in New Jersey, he understands this region, he understands the economic impact. It’s very frustrating, but I’m also optimistic.
We’ve got a unified Congressional delegation on both sides of the Hudson, frankly up and down the Northeast Corridor. I haven’t found a Democrat or Republican who’s opposed to this. And so ultimately, something this obvious should get done, and I’m optimistic it will.