Governor Murphy Signs FY21 Budget for New Jersey
On Sept. 29, Governor Phil Murphy signed New Jersey’s fiscal year 2021 budget, ending months of speculation about taxes and borrowing and leaving business leaders shaking their heads.
The budget is $1.5 billion higher than the fiscal year 2020 budget, an increase of about 3.5 percent. It includes $700 million in tax hikes and $4.5 billion in borrowing. When added to the “mini budget” that the Governor signed in June to cover the months of July through September, the total budget is $40.4 billion. The budget also includes a $2.5 billion surplus.
“Considering the damage that the coronavirus pandemic has done to the state’s economy and fiscal health, this budget is fiscally irresponsible to say the least,” said NJCPA CEO & Executive Director Ralph Albert Thomas, CPA (DC), CGMA. “This budget is the opposite of the austerity budget these times call for.”
The $700 million in tax hikes includes a corporate business tax (CBT) surtax of 2.5 percent on corporations with income over $1 million, giving New Jersey the highest CBT in the country. This surtax will be in effect for four years and continues a surtax that was supposed to be phased out next year.
Additionally, the budget extends the “millionaires’ tax” of 10.75 percent to income over $1 million. Previously it only applied to income over $5 million.
Also signed into law was a rebate program of several hundred million dollars that provides rebates of up to $500 to 800,000 households. The rebates are limited to two-parent households with less than $150,000 in gross income and at least one dependent child and single-parent households with no more than $75,000 in gross income and at least one dependent child. The proposal still needs to be funded in next year's budget.
A $4.7 billion payment to the public employees’ pension fund, when combined with the cost of health benefits for the public workers, eats up approximately 25 percent of the budget.
One bright spot in the budget was the restoration of $275 million in funding for the Homestead and $220 million for Senior Freeze property tax relief programs. The Homestead credit is a popular property tax relief program for about 580,000 seniors, disabled or low-income homeowners. Senior and disabled homeowners with income below $150,000 average $534 benefits and other eligible homeowners with less than $75,000 receive an average of $410.