NJ shutdown: With 9 days left, Phil Murphy, top lawmakers no closer to budget deal

James Nash | NorthJersey

Show Caption Hide Caption Budget battle in Trenton Governor Murphy and legislative leaders differ over numbers as they fail to approve a new budget. (June 21, 2018)

With nine days to approve a budget, New Jersey's top lawmakers and Gov. Phil Murphy came no closer to reaching a deal over tax increases that would avert the second government shutdown in two years and pump more money into schools and trains.

Murphy on Thursday accused lawmakers of perpetuating "idiocy" and relying on "alt-facts" as they approved a budget that would eschew Murphy's proposed income and sales tax increases in favor of a two-year boost in corporate taxes.

Senate President Stephen Sweeney shot back later in the day, accusing the Murphy administration of “a lack of focus and a lack of honesty” during negotiations.

“It’s not Goldman Sachs. We’re not going to be told what to do,” Sweeney said, referring to Murphy's past as a finance executive. “We want to be partners. We’re going to be equal partners.”

The normally mild-mannered governor offered pointed comments at a news conference in Trenton about an hour after leaving a meeting with Sweeney and Craig Coughlin, the Assembly speaker. All are Democrats, but Murphy suggested that he's negotiating with the ghost of Chris Christie, his Republican predecessor.

"I got elected to come here and crack the back of this idiocy," Murphy said. "Phantom numbers, Band-Aids, toothpicks. Enough. The 9 million residents of this state want adult, responsible leadership that makes an historic reinvestment in the middle class."

Sweeney, in turn, threw the ghost of Christie back at Murphy, accusing the current governor of bullying lawmakers to vote for the budget with threats to kill their appointments and projects in their districts.

Murphy denied reports that he approached legislative leaders with a compromise that would raise the sales tax to 7 percent from 6.625 percent over two years, rather than immediately, as he earlier proposed, and apply his 10.75 percent "millionaires tax" only to incomes above $5 million rather than $1 million.

"We did have some conceptual conversations about tweaking the edges of some things," Murphy said, declining to offer specifics.

The two sides do agree on raising taxes and boosting how much is spent on public schools, NJ Transit and the state's troubled pension fund.

The fight boils down to what taxes will get raised, by how much and where the money will go.

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Unexpected boost

Perhaps easing some pressure on raising taxes, New Jersey got a welcome surprise Thursday in the form of a U.S. Supreme Court decision that gives states more authority to collect sales tax from online retailers.

New Jersey stands to gain between $216 million and $351 million, according to a 2017 estimate by the federal Government Accountability Office. Before Thursday’s ruling in South Dakota v. Wayfair, New Jersey could not require companies without a physical presence in the state to collect and remit sales taxes.

“Clearly, the timing is good,” said Sen. Paul Sarlo, D-Wood-Ridge, the budget committee chairman, adding that New Jersey could start collecting more sales tax by July 1.

It’s not yet clear if enabling legislation is required and how much the state believes it could bring in during the new fiscal year. Sarlo said the Treasury Department and the Office of Legislative Services were working together to answer those questions.

Murphy likewise said his administration hasn't calculated how much New Jersey could gain from the ruling, only that it would exceed $24 million in the year beginning July 1.

The Legislature did approve a Sweeney bill to adjust the formula for funding public schools, a key factor in local property taxes. The change is intended to boost aid to schools with growing enrollments and would phase out over seven years subsidies awarded to districts for student populations they no longer have.

Aides to the governor and legislative leaders affirmed that they expect to see an amicable resolution before July 1, when the lack of an approved budget would result in state offices and parks closing and thousands of workers being sent home on furlough.

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The Senate and Assembly voted on budget bills late Thursday. Their plans are based on the two-year corporate tax increase and the other temporary measures.

Some Assembly members, facing challengers in their reelection campaigns next year, abstained from voting on the tax increases, which passed narrowly.

Lawmakers could revise their bills after meeting with the governor.

School aid formula

State aid to school districts is by far the largest component of Murphy's proposed $37.4 billion spending plan, accounting for nearly 44 percent of expenditures.

Legislative leaders aren't quibbling with Murphy's plans to spend more on schools, but they blasted his initial budget proposal as perpetuating inequities in state aid that harm districts like Paterson while benefiting districts like Jersey City.

Lawmakers and Murphy have ironed out most of their differences and appear to be in accord on an aid plan that would bring all districts to full funding under their formulas by 2025. That plan was approved by both houses Thursday.

Sweeney and Coughlin introduced a measure to move $60 million from overfunded districts to the most underfunded schools. It would also add $65 million to the $283.6 million in new school formula funding that Murphy proposed.

The legislative plan would result in an overall 4.3 percent increase in state aid for schools in the year beginning July 1. Bergen County school districts would get an additional 18.4 percent, ranging from a 157.2 percent increase in River Edge to a 7.8 percent decrease in Englewood, according to the Office of Legislative Services.

Passaic County schools would gain 5.8 percent overall, ranging from 34.7 percent in Woodland Park to a 2.9 percent decrease in Lakeland Regional.

The cost of local education is a major factor in local property taxes. Cuts to state aid can mean higher local taxes, but a boost can help avoid a higher property tax bill.

As is often the case with deadline-sensitive negotiations, this one will likely come down to the wire.

Legislative aides declined to detail the nature of the first round of talks Thursday morning. Emerging from a roughly 30-minute discussion with Murphy and Coughlin in the afternoon, Sweeney declined to comment on the afternoon session.

Staff Writers Nicholas Pugliese and Catherine Carrera contributed to this article. Email: nashj@northjersey.com