New Jersey sees ‘record surplus,’ but faces warning of possible fiscal cliff next year
(The Center Square) – New Jersey is poised to end the 2021 fiscal year with a “record surplus” of about $6.4 billion, but federal money is helping make the state’s fiscal picture look as rosy as it does.
When lawmakers passed 2021 fiscal year spending, they projected an opening surplus of $2.2 billion, Thomas Koenig, legislative budget and finance officer, said in prepared testimony to the state Senate Budget and Appropriations Committee. That level was anticipated to increase to more than $2.8 billion by the end of the fiscal year.
“The revised year-end surplus for the current fiscal year now stands at an astonishing $3.5 billion higher,” Koenig said.
“Many factors have brought about this unexpected outcome,” Koenig added. “… But we would be amiss not to acknowledge the federal government’s enormous financial support during the pandemic. Imagine our budget without the over $7.9 billion in federal COVID-19-related supplemental appropriations the state recorded since the pandemic began through March 28.”
The surplus does not include additional federal dollars about to flow into the Garden State with the American Rescue Plan Act of 2021. As part of the COVID-19 relief package, the federal government is sending $10.2 billion to New Jersey, including $6.4 billion to the state government.
Proposed 2022 fiscal year expenditures of $44.8 billion exceed anticipated revenues collections by nearly $4 billion. While the revised 2021 fiscal year and proposed 2022 fiscal year budgets “meet the constitutional requirements of a balanced budget and leave a projected surplus of $2.4 billion,” Koenig suggested, “a look toward FY 2023 might be warranted.”
“This means that the surplus-supported FY 2022 looks unlikely to be repeated in FY 2023 without significant revisions to spending and revenue policies, all other factors being equal,” Koenig said. “The infamous cliff fiscal policy experts worry so much about these days.”
During a Wednesday news briefing, Gov. Phil Murphy noted New Jersey’s workforce is smaller today than when he was sworn into office. The state, he said, needs to grow its economy and not spend the surplus “like drunken sailors.”
“There’s always this discussion, ‘well it’s not just this year’s budget, it’s what’s it going to look like the year after?’” Murphy said. “And I think that’s probably a rightful narrative based on the way things used to be done in this state, which is plug in a lot of holes with Band-Aids.
“… I don’t have a particular comment on fiscal ’23,” Murphy added “I think there’s a lot of unanimity around the fact that … we don’t have a lot of appetite, trust me, to tax a lot more stuff.”
New Jersey’s fiscal condition drew the ire of state Sen. Steven Oroho, R-Sussex.
“During the pandemic, the Murphy administration has not been transparent about our state’s finances, they haven’t used the billions of federal relief or State surplus funds at their disposal to help people, and they’re setting New Jersey up for major tax increases a year from now,” Oroho said in prepared remarks to the committee. “… The multi-billion-dollar surplus the governor built while people suffered, the billions he borrowed unnecessarily, and billions in federal aid are going to fund a massive expansion of government in Governor Murphy’s proposed budget – an election year budget – that we won’t be able to afford after this year.”
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