Senate president discusses problems he has with some of the governor’s policies and programs. Tighten your seatbelts, it’s going to be a bumpy budget season

Senate President Steve Sweeney isn’t backing Gov. Phil Murphy’s plan to provide two years of tuition-free education to income-qualified students attending New Jersey’s four-year public colleges and universities.

“I don’t support that even a little bit,” Sweeney told NJ Spotlight writers during an interview Wednesday in Newark.

The higher-education policy unveiled by Murphy last month is intended to build on a similar program the governor and lawmakers launched two years ago that offers tuition-free community college to income-eligible students.

But Sweeney (D-Gloucester) said he’s concerned that expanding free tuition to four-year schools could end up hurting community colleges by putting them in direct competition with their four-year counterparts.

In other words, Sweeney said he’s firmly against what is one of the governor’s top policy priorities for fiscal year 2021.

“Why would you compete against yourself? That makes zero sense,” Sweeney commented.

Defending Murphy’s initiatives

In a response provided by Murphy’s office later Wednesday, spokesman Darry Isherwood defended the initiatives, saying they “make college affordable in New Jersey,” a top priority of the governor’s.

“Together, these two programs will provide thousands of New Jersey students with a pathway to a tuition-free college degree,” Isherwood said.

But the disagreement over higher-education spending appears to be just one of many conflicts on budget and tax policy that have emerged between the Democratic leaders since Murphy unveiled his budget plan for FY2021, which begins in July.

Sweeney has also not embraced a series of tax increases Murphy included in his spending proposal, such as a hike in the per-pack tax on cigarettes and assessing a new fee on large companies that rely on Medicaid to help cover a significant share of their employee health insurance. In addition, the Senate leader is promising this year’s legislative review of the governor’s budget proposal will be more intense than prior years, and suggested department heads who come before budget-committee members over the next few weeks should expect to be grilled.

Sweeney wants ‘answers’

“We’re going to challenge them. We’re going to dig in,” Sweeney said. “We want answers.”

In all, Murphy’s $40.85 billion budget plan for FY2021 is roughly $2 billion, or 5%, larger than the spending bill he signed into law for the current fiscal year. The increased spending is sustained in part by an assumption that the state’s economy will continue to generate more revenue. But it also relies on about $1 billion in new revenue coming from a series of proposed tax increases and new taxes.

For example, Murphy is also seeking to establish a new levy on opioid manufacturers and raise a host of fees related to the purchase or sale of guns and ammunition. What’s more, for the third year in a row the governor’s budget plan calls for a true millionaires tax that would hike the income-tax rate on earnings over $1 million and up to $5 million.

In the past, Sweeney has both supported and opposed the millionaires tax. But more recently, he has been a staunch opponent, citing as a major factor President Donald Trump’s capping in 2017 the previously unlimited federal tax deduction for state and local taxes at $10,000.

Still, this year Sweeney is saying he won’t stand in the way of levying a millionaires tax, but only if Murphy adds $1 billion to the $4.6 billion state pension contribution that the governor is budgeting for the 2021 fiscal year. While Murphy’s proposed pension contribution would set a record for the state, it would still fall below the full amount that actuaries have calculated as the state’s required pension contribution for FY2021, which is $6.1 billion.

Sweeney wants ‘100%’ pension funding

“If we can get to 100% pension funding … what it does for us is it frees up our ratable growth that we have year-in and year-out to start funding the other priorities that we have,” Sweeney said.

Despite his reluctance to go along with any of Murphy’s other tax-hike proposals, Sweeney is in favor of keeping in place a state-tax surcharge on top-earning corporations that is slowly being phased out over the next few years. He wants to use the up-to $300 million in revenue that would stay in the budget by maintaining the surcharge to help provide dedicated funding for New Jersey Transit, the state’s beleaguered mass-transit agency. And the recent downturn in the financial markets, which has raised concerns among many economists that a recession may be imminent, is not a reason to change course on the surcharge, Sweeney said.

“What we’re hoping is that there’s going to be a correction, and not a recession,” he said.

While Murphy supports letting the state surcharge phase out, Sweeney said the corporations who get hit with it have benefitted greatly in recent years from a long economic expansion and major corporate-tax cuts enacted by Trump.

“I think it’s only fair for these corporations to participate in the funding of transportation since they’re one of the largest (beneficiaries) of it,” Sweeney said.

Meanwhile, another area where Sweeney and Murphy differ on the budget is in the area of extraordinary special-education funding. While Murphy holds that line item flat in his spending plan, even as overall K-12 funding would increase, Sweeney wants to tack on an additional $150 million in spending for special education, something he said has bipartisan support.

“That would fully fund it,” Sweeney said.

And then there’s the brewing conflict over the expansion of the free-tuition program, which Murphy is calling the Garden State Guarantee. Under his proposal, schools that participate in the program would get increased operating support from the state — a total of $50 million is earmarked in Murphy’s budget for the 2021 fiscal year — in exchange for providing tuition-free enrollment to students with annual household incomes below $65,000 for up to two years. The colleges and universities would also have to agree to further conditions for all other students if they accept the additional operating support from the state.

Building on two-year foundation

The expansion to four-year schools builds on the Community College Opportunity Grant program that was launched two years ago and now serves an estimated 7,500 students.

“In his first budget he introduced tuition-free community college and in this budget he is complementing it with the introduction of the Garden State Guarantee,” Isherwood said.

But Sweeney said he would prefer to see overall higher-education support increased in the budget to help address the affordability issue rather than the creation of another government program.

“The way to solve this is to try to find ways to fund higher education, not gimmicks,” he said.

Among other parts of the governor’s budget plan that Isherwood highlighted in response to Sweeney’s critique was the proposed funding boosts for worker pensions and K-12 education, as well as a sizable increase for NJ Transit that would be supported by the governor’s proposed tax policies.

“By seeking to eliminate commonsense revenue increases while at the same time pursuing over $1 billion more in spending, the Senate president is doing little more than creating an unfillable hole in the budget,” Isherwood said. “We hope the Legislature supports the governor’s fiscally responsible and progressive spending plan.”