$7.8B In Extra Tax Revenue In NJ: How Should The State Use It?

NEW JERSEY — New Jersey has plenty of extra money on its hands, with tax revenues running $7.8 billion higher than the amount Gov. Phil Murphy originally projected, state-budget analysts told state lawmakers Monday. That's prompted a major question: what should the state do with the money?

Murphy administration officials testified to state lawmakers Monday that strong revenue collections in April and May produced billions more than expected.

"The state’s fiscal picture is remarkably strong," said Deputy Treasurer Aaron Binder.

New Jersey's tax collections through April increased $13.5 billion — about 35 percent — beyond what they were two years ago during the beginning of the pandemic. COVID-19's economic impacts prompted the Murphy administration and Democratic lawmakers to borrow about $4 billion to offset losses.

But the losses never fully materialized, leaving state leaders in an unusual position of deciding how to manage the unexpected billions of dollars. Analysts from the Office of Legislative Services now expect New Jersey to receive nearly $51 billion by the end of June — about $8 billion higher than revenues Murphy certified at the beginning of the fiscal year last July.

Murphy and legislators now face a challenge of what to do with the extra money. The administration and lawmakers must agree on a state budget before July 1 — the start of the next fiscal year.

Republican lawmakers on the Senate Budget & Appropriations Committee called on the state to provide tax relief. State Senate Republicans proposed a pair of "Give It Back" tax rebates.

"My Republican colleagues and I can’t support a budget unless 4 million families receive $1,500 of direct relief this spring to help combat the pain caused by over taxation, soaring gas prices, and inflation," said Senator Declan O’Scanlon (R-13).

The "Give It Back" tax rebate — first introduced in March — would provide $1,000 to New Jersey families as soon as it's enacted. A second bill — the Gas Price and Inflation Tax Credit Act — would provide another $500 tax rebate to counter record-high gas prices, Republican lawmakers said. The bills haven't made it out of committees.

State Senator Paul Sarlo (D-36) proposed using the surplus to prepare for an economic downturn.

"The Treasury Department agrees with me," Sarlo said. "We should increase the size of the state surplus so we are prepared for economic downturns that are likely to come. The surge in state revenue is welcome, but it comes with warnings. We can’t expect it to continue. We have to be prudent and responsible in how we manage resources."