Fresh off striking a budget deal that included $1.6 billion in new taxes, Gov. Phil Murphy said he was banking on strong economic growth going forward to raise the money he needs to fulfill a long list of progressive promises.

“We’re neither going to cut our way to salvation, nor are we going to tax our way to salvation,” Murphy, a Democrat, said in a July interview with NorthJersey.com and the USA TODAY NETWORK New Jersey. “The road that we’ve got to be absolutely laser focused on is grow our way to a better tomorrow.”

But economic growth alone is likely to leave Murphy at least $300 million short — and potentially much more — of what he needs next year to cover pledged funding for schools, public employee pensions and other priorities, according to an analysis by the Network.

That could force him to make politically painful decisions to cut programs or push to raise taxes further.

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Murphy has said that with better policies in place under his predecessors, New Jersey could have added $2 billion to $3 billion a year in revenue from economic growth — a mark he says the state can achieve under his leadership.

As it is, however, New Jersey hasn't added $2 billion in revenue at any point in the past decade.

All the while, New Jersey faces ballooning pension costs for public employees, growing outlays for health benefits and a broken NJ Transit system that could prove expensive to fix. And that's in addition to Murphy's other promises to increase funding for public schools, expand pre-K, provide tuition-free community college and enhance tax credits for low- and moderate-income working families.

Cutting any of those programs threatens to alienate key portions of Murphy's base, while raising taxes could anger voters and spark a battle with Senate President Stephen Sweeney, D-Gloucester, and other Democrats in the Legislature who reluctantly went along with tax increases this year.

Experts on New Jersey's government and economy agree that Murphy's philosophy of growth will not be enough to cover his own program's costs, let alone fulfill his promise to address the state's nation-leading property tax rates.

"You're not ever going to raise enough money in income tax to bring that property tax to a point where we're not always No. 1 or 2 in the country," said Marc Pfeiffer, assistant director of Rutgers University's Bloustein Local Government Research Center and a member of a Sweeney-assembled panel that recently recommended a slew of government reforms.

An economic downturn would further complicate Murphy's governorship.

Betting on rosy forecasts of economic growth is a familiar position for political leaders to take. Former Gov. Chris Christie, a Republican, did it, and so has President Donald Trump.

But New Jersey's own history does not bode well for Murphy's agenda.

“Phil Murphy wants to spend like he’s got a California economy, but he just doesn’t,” said Matthew Hale, a political science professor at Seton Hall University, referring to another state with a progressive governor but one, unlike New Jersey, whose growth over the last decade has outpaced the nation's.

“You can’t spend like California unless you earn like California,” Hale said.

The analysis by NorthJersey.com and the USA TODAY NETWORK New Jersey used historical growth in state revenues to project what Murphy could reasonably expect to have heading into the 2020 fiscal year, which begins July 1 next year, and compared that against what he has vowed to spend.

Where price tags for certain programs were unavailable, estimates were based on conversations with government officials or extrapolated from current funding levels based on Murphy’s public statements.

Including a projected 5.3 percent jump in the current fiscal year, state revenues have increased an average of 3.1 percent annually since 2010. At the same pace, Murphy could expect a bit more than $1.1 billion in new revenue next year on top of this year’s $37.4 billion budget.

But Murphy is set to lose $400 million in revenue from two tax initiatives — a tax amnesty program and a tax on repatriated corporate assets — that largely phase out after this year. Combined with a scheduled $667 million increase in payments into the pension system, the new revenue Murphy has to play with is almost entirely consumed.

And that’s before roughly $397 million in other costs Murphy has committed to or is likely to encounter. They include:

$170 million to cover new health benefits costs for active and retired public employees, assuming a 5 percent increase over this year’s $3.4 billion price tag;

to cover new health benefits costs for active and retired public employees, assuming a 5 percent increase over this year’s $3.4 billion price tag; $100 million in new aid for public schools, in line with Murphy’s promise to fully fund public education under the state’s school funding formula;

in new aid for public schools, in line with Murphy’s promise to fully fund public education under the state’s school funding formula; $75 million for tuition-free community college, bringing total state funding to $100 million in the second year of a program Murphy said he would phase in over four years at a total cost of $200 million;

for tuition-free community college, bringing total state funding to $100 million in the second year of a program Murphy said he would phase in over four years at a total cost of $200 million; $27 million toward expanding the Earned Income Tax Credit from 35 percent to 40 percent of the federal benefit, which is the same increase Murphy provided this year as part of a three-year process; and

toward expanding the Earned Income Tax Credit from 35 percent to 40 percent of the federal benefit, which is the same increase Murphy provided this year as part of a three-year process; and $25 million to build toward Murphy's goal of universal pre-K.

In total, that leaves Murphy more than $300 million in the hole.

NJ Transit and other strains

Other potential costs are harder to quantify but will put additional stress on the state budget. Due to inflationary pressure on things like wages and utilities, the routine cost of running state government typically increases every year.

Then there is NJ Transit. Murphy said in July that more than doubling the direct state subsidy for the agency in the current budget — from $141 million to $308 million — might be all it needs going forward. But the plight of commuters enduring chronic delays and cancellations in recent weeks could make him change his mind.

And despite the new funding, the NJ Transit board of directors voted last month to shift $511 million from its capital budget to cover day-to-day operations, the biggest such raid in history and a practice Murphy has said causes long-term damage.

Murphy recently said he "can't promise" fares won't rise in his next budget.

Murphy’s first budget also continued other raids started by his predecessors and criticized by Murphy as a candidate. The governor’s first budget took a combined $236 million from the Clean Energy Fund and Turnpike Authority to help fund NJ Transit, plus $50 million from the Affordable Housing Trust Fund and Housing and Mortgage Finance Agency to pay for unintended programs.

'Damned hard’ problem to fix

Thomas Healey, a Republican real estate developer who led a bipartisan commission under former Gov. Chris Christie to study pension and health benefits reforms, performed a similar analysis in which he concluded Murphy was already facing a potential funding gap of at least $600 million.

He published his math last month in an op-ed for NJ.com and said in a subsequent interview with The Record and NorthJersey.com that it would be “damned hard” to close that gap.

“The pension cost isn’t going to go down. It’s hard to reduce school budget costs. Any of the personnel costs can’t be reduced unless you fire a lot of people, which Murphy is not going to do,” he said. “So where do you save $600 million to make the budget balanced? That’s why it’s so painful. And it’s going to be even worse in two years because you have another $600 million baked into the pension.”

Murphy does have some new revenue sources to support his agenda. The expected passage of recreational marijuana is estimated to bring in about $120 million a year, while medical marijuana could raise about $20 million.

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New Jersey's move to legalize sports betting following a U.S. Supreme Court decision earlier this year could add another roughly $25 million a year to state coffers.

And Murphy said a new panel he formed to study health costs for public employees could save the state up to $100 million a year.

But Murphy has also said he is leaving open the possibility of asking lawmakers to raise taxes again. That could take the form of reverting the sales tax to 7 percent from the current rate of 6.625 percent, lowering the top-rate threshold on millionaires or some other revenue-raiser.

In a statement, Treasurer Elizabeth Maher Muoio reiterated Murphy's call for sustainable revenue sources and said the department would "continue to monitor revenue performance closely and pursue available avenues for cost-savings in order to ensure the state is positioned to meet its growing obligations both in the short and long-term.”

Email: pugliese@northjersey.com and racioppi@northjersey.com