Gov. Phil Murphy (center) speaks during a news conference on Saturday in Trenton announcing a budget deal between him and Democratic legislative leaders, including Assembly Speaker Craig Coughlin (left) and Sen. Stephen Sweeney (D-New Deptford). | Julio Cortez/AP Photo New Jersey leaders strike budget deal that raises taxes on millionaires, corporations

TRENTON, N.J. — New Jersey averted its second state shutdown in two years on Saturday when Gov. Phil Murphy and legislative leaders struck a deal just hours before the state budget deadline, putting an end to a bitter fight that had divided Democrats and drawn the attention of national party leaders.

After an intense negotiating session that lasted for more than four hours, Murphy joined state Senate President Steve Sweeney and Assembly Speaker Craig Coughlin at a press conference early Saturday evening to announce they had settled their months-long feud over who had the best plan to raise new taxes.


In the end, they agreed to a $37.4 billion budget that raises taxes on millionaires earning $5 million or more and on some corporations, merging their concepts into one plan. Murphy also agreed to drop his proposal to restore the state sales tax to 7 percent.

The three men chalked up their sharp words in recent weeks to a family feud.

“This is not a win for any of us individually,” Murphy said from the podium in his office, surrounded by the lawmakers he’d been at war with for weeks. “This is a win for the middle class and working families and those who look up and dream to be in the middle class all across New Jersey. There is so much we agree upon. There was never a disagreement over our values or our principals, just over how to get there.”

New Jersey is the only state in the nation that hasn’t enact some kind of spending plan ahead of the start of the new fiscal year on Sunday. The governor and the legislative leaders had until midnight to get a budget in place.

The state will still miss the deadline, with both houses of the Democrat-controlled Legislature scheduled to vote on the plan at 8 a.m. Sunday. But Murphy has the power to keep government running until a spending plan is signed, and said he would do so.

“Let me be clear: There will be no shutdown,” the governor declared. “The parks and beaches are open.”

The accord comes a year after former Republican Gov. Chris Christie was photographed sitting on an empty state beach in the middle of a similar feud. Trenton seemed to be veering in the same direction this year, with name-calling and increasingly personal accusations that painted the image of a state government in full political meltdown.

In recent days, the dispute drew opinions from some big names, including former Vice President Al Gore, New York City Mayor Bill de Blasio, former Vermont Gov. Howard Dean and comedian Chelsea Handler, all of whom took the governor’s side as he pushed a liberal vision of “tax fairness.”

Despite months of negotiations, Murphy and the legislative leaders had found themselves struggling to come to terms over how to pay for hundreds of millions of dollars in new spending they had all agreed to support. Most of the money goes to boosting state aid to school districts and fixing the state’s troubled commuter transportation agency, NJ Transit.

In the end, their feud had come down to this: Murphy wanted to raise taxes on millionaires. Sweeney wanted to raise taxes on corporations. They finally agreed on Saturday to blend both ideas into one proposal.

The deal will increase the tax rate on those earning more than $5 million per year to 10.75 percent, up from the current 8.97 percent. Murphy had previously been pushing that higher rate on everyone earning more than $1 million.

The two sides settled on a four-year increase in the corporate business tax, imposing a surcharge on all companies earning more than $1 million per year. The surcharge will increase the current 9 percent rate by 2.5 percent in the first two years, before phasing out over two years. Sweeney has previously proposed a 3 percent surcharge that would have given New Jersey the highest corporate tax rate in America.

The two tax increases will provide $705 million in new revenue over the fiscal year.

“We wanted a budget that protected New Jersey taxpayers and made sure those that received the largest windfall from the Donald Trump tax cuts paid their fair share,” Coughlin said.

The kumbaya moment offered a stark contrast to the tough-guy positions the lawmakers had staked out just hours earlier. Murphy and the legislative leaders found themselves so angry with each other that they took to public name calling.

Murphy, a former Goldman Sachs executive and former U.S. Ambassador to Germany, and Sweeney, a top official in an ironworkers union who’s led the Senate for eight years, both accused each other of acting like Christie, the wildly unpopular former governor who left office in January.

On Saturday morning, Sweeney said he thought Murphy, a liberal who campaigned on a promise to address income inequality, was blocking his effort to raise taxes on companies for his own personal gain.

“We think he’s under-taxing corporations, and I’m starting to understand why: Because he makes his livelihood from corporate dividends,” Sweeney said in an interview with POLITICO.

A day earlier, Murphy and his lieutenant governor, former Assembly Speaker Sheila Oliver, said Sweeney and Coughlin had offered merely “symbolic” proposals that failed to address the very issues they campaigned on last year.

"I have never seen the level of obstructionism come from the legislative leadership as I am seeing in this cycle," Oliver, who has worked on 15 budgets, said Friday night. “They do not want to work with Governor Murphy.”

Half a day later, Sweeney had completely changed his tone, joining Murphy and Coughlin in pushing a theme of unity.

“I want to start by thanking the governor and our leadership teams,” the Senate president said. “It’s been one hell of a journey. As the governor said, it’s never been a disagreement over where we wanted to go, it’s how we got there. And we all got to a place we think is fair.”

Murphy said they had “honest, blunt, sometimes heated, yet always civil discussions” and, in the end, got to the right place within the time they had.

“There is so much we agree upon,” he said. “There was never a disagreement over our values or our principles, just over how to get there.“

At the end of their press conference, Murphy and Sweeney shook hands and embraced, the Senate president patting the governor on the back twice before saying, Good job.”

“You, too,” Murphy replied.