No NJ Shutdown: Budget Deal Reached

New Jersey Gov. Phil Murphy and state lawmakers reached a budget deal late Saturday that will prevent the government from closing down.

The deal was reached around 7 p.m. after Murphy offered a few big tax concessions as New Jersey neared a government shutdown deadline at midnight.

One of those concessions involved not raising the sales tax and raising the income tax on those who make $5 million or more. Murphy wanted the threshold to be $1 million, and later proposed $1.75 million.

"There will be no shutdown," Murphy announced. "The parks and beaches will be open."

The agreement outline, which carries a $765 million surplus in an approximately $37.4 billion overall budget, includes:

• An increase in the income tax to 10.75 percent on filers with incomes of $5 million and above, providing approximately $280 million in new annual revenues
• A corporate business tax surcharge averaging 2 percent over 4 years – the first 2 years at 2.5 percent, which will provide $425 million, and the third and fourth year at 1.5 percent
• Adoption of a Combined Reporting standard which will ensure companies cannot place their profits in other states
• Raising the state property tax cap deduction from $10,000 to $15,000
• Increasing the Earned Income Tax Credit (EITC) through an additional investment of $27.2 million to help over 510,000 families
• Creating a Child and Dependent Care Tax Credit to help over 70,000 New Jerseyans earning less than $60,000 per year care for a child or other dependent
• A $3.2 billion pension payment, the largest in state history

The budget agreement also maintains the governor’s investment of $242 million for New Jersey Transit in addition to $402 million for education, including pre-K; and the restored funding sought for Homestead Rebates.

The budget also restores $25 million in aid for community colleges to put New Jersey on the path toward tuition-free community college.

Much of the disagreement involved taxes and school funding. Murphy said he put forward a budget backed-up by "sound and sustainable revenues" that would also close corporate tax loopholes.

Senate President Steve Sweeney resisted tax hikes – though he pushed for the corporate tax increase –and said the Democratic Legislature would insist on providing increased state aid to underfunded school districts.

It was not immediately clear how this agreement would impact school funding, but Sweeney said it will put New Jersey "on the road" toward reaching his objective of "fully funding" school districts, while cutting funding from others.

The Murphy administration said the budget includes "the means to implement Senate President Sweeney’s modernization of the school funding formula."

Read more: 188 School Districts May Have To Raise Taxes To Stop NJ Shutdown

"We've got every dollar for these investments," Murphy said.

State lawmakers say they've wanted to avoid the embarrassment caused by last year's shutdown, when ex-Gov. Chris Christie was caught by a photographer as he set with his family on the closed Island Beach State Park beach.

In a letter obtained by Patch, Murphy had agreed on Friday to take a sales tax hike to 7 percent "off the table" and he raised the threshold on his so-called millionaire's tax proposal.

Murphy's initial concessions would have:

• Raised taxes to 10.75 percent on those earning $1.75 million or more – up from his initial demand $1 million. He said the tax hike would raise $550 million.
• Imposed a 4-year corporate business tax surcharge of 2 percent, generating $320 million in annual revenue.

Here is what would have closed down in the event of a shutdown:

• Casinos and racetracks...if the shutdown were to last more than 7 days.
• State parks – most notably Island Beach State Park, which typically fills up on July 4 weekend.
• Motor Vehicle Commission offices...although you can still renew your registrations and other related paperwork online.
• Non-essential state offices and most state courts

The Murphy administration and state lawmakers held a joint press conference on the agreement. You can watch it here:

Gov. Murphy YouTube photo