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Gov. Phil Murphy’s administration has ordered a pause on some pay raises for state workers, limits on new hires and spending cuts to bridge structural deficits in the state budget, according to emails reviewed by the New Jersey Monitor.
The emails, sent last week and in early October, come amid an annual budget that calls for New Jersey to spend $2.1 billion more than it takes in through taxes and other revenue sources. Built-in cost increases and expiring one-shot revenue sources are set to widen the structural to more than $3.5 billion next year.
“To conserve state resources, effective immediately and with limited exception, the state will halt approvals of discretionary pay increases for department employees, including outstanding requests,” Tim Hillman, Murphy’s chief of staff, said in a Nov. 21 email to cabinet members first reported by ROI-NJ.
Raises required by law, a court order or union collective bargaining agreements can still be used, Hillman said. Although hiring and onboarding already underway could continue, Hillman asked department heads to limit new hires to critical positions.
A separate early October email sent from the office of Tariq Shabazz, the acting director of the Office of Management and Budget, told department heads they would get preliminary budget targets around Oct. 4 for the next fiscal year from July to June. and they are expected to identify savings equivalent to 5% of this target.
“Each agency will be required to submit budget savings for the upcoming budget year,” the email states.
The budget office could approve smaller spending reductions under some circumstances, the email adds.
The governor’s call for cuts follows years of spending increases that saw New Jersey’s annual budget rise from $34.7 billion in fiscal year 2018 — the final budget under Gov. Chris Christie — to $56.6 billion this year.
Much of that increase has come from increased state aid for pensions and school aid, which have added about $8.2 billion to New Jersey’s annual spending compared to Christie’s last year in office. Expanded tax credits and rebates, such as $3.5 billion. The Anchor tax relief program has also boosted government spending.
The next state budget will be Murphy’s last in his second term. He is barred from seeking a third consecutive term next year.
Murphy’s appeal to tighten the belt was well received by at least some lawmakers, including a top state House budget man.
“I’m not really shocked that he’s doing this. I actually think it’s the right thing to do, even though the revenue is coming in strong,” said Assemblywoman Eliana Pintor Marin (D-Essex), the chamber’s budget chair.
Through September, New Jersey’s revenue hit targets and rose 4.3% year-over-year, driven largely by strong personal income tax collections.
Republican officials welcomed the spending cuts but worried that a staffing freeze could worsen services at some already hard-to-reach offices.
Late. Doug Steinhardt (R-Warren), a member of the Senate Budget Committee, said he would prefer more targeted cuts — including to budget supplements requested by lawmakers — over 5% reductions across the board.
“Just stop spending money on programs you don’t need,” Steinhardt said. “If you didn’t piss it off in the first place, you wouldn’t just be demanding broad-brush cuts here and broad-brush cuts there.”
The administration did not identify any specific targets for cuts in its Oct. 1 email, although it noted that some expenses, such as debt service, could not be reduced.
Pintor Marin said she doesn’t expect Murphy to support cuts to property tax programs.
“I think he’s going to care about helping seniors and helping people with their taxes to make New Jersey more affordable,” she said.
State governments are generally required to balance their costs and their revenues. When spending exceeds tax collections, the state can fill the gap by using surpluses, as New Jersey is doing this year.
New Jersey is expected to end the fiscal year with about $6.2 billion in reserves, up from about $8.2 billion on July 1.
Progressive think tank urges tax hikes to close budget holes
The fledgling Stay NJ property tax relief program requires New Jersey to maintain a surplus equal to at least 12% of spending to avoid a break, though lawmakers overrode that provision using budget language in the current fiscal year that bumped reserves up to 10 .9% of consumption.
The program is one source of escalating costs New Jersey faces in the coming years. It will add $100 million in costs in the fiscal year that begins July 1 and is expected to cost about $1.2 billion annually when it takes full effect in 2026.
New Jersey’s recently passed corporate transit fee — a non-marginal 2.5% surtax on businesses with at least $10 million in revenue — will expand New Jersey’s deficit by about $1 billion after its revenue is dedicated to NJ Transit in the coming fiscal year.
The governor must deliver his annual budget speech at the end of February.
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