New Jersey Gov. Phil Murphy proposed taxing online-room booking, ride-sharing, marijuana, e-cigarettes and internet transactions along with raising taxes on millionaires and retail sales to fund a record $37.4 billion budget that would boost spending on schools, pensions and mass transit.
The proposal, 4.2% higher than the current fiscal year's, relies on a tax for the wealthiest that has yet to be approved and lacks support from key Democrats in the Legislature. It also reverses pledges from Mr. Murphy's predecessor, Republican Chris Christie, to lower taxes in the state where living costs are among the nation's highest.
The budget includes a record $3.2 billion payment to the $77.6 billion New Jersey Pension Fund, putting the state on course to resume full funding by 2023, according to budget officials. The state would also gain $100 million by closing a carried-interest loophole on hedge fund income.
Mr. Christie, in his final speech before lawmakers in Trenton a week before he left office, warned that inaction on pensions during his administration, and before, amounted to "the sword of Damocles that hangs over the head of every New Jerseyan." Mr. Murphy, having led an appointed panel to propose pension solutions in 2005, said then and now that the state must make full payments after more than a decade of skipped or reduced contributions.
On March 1 his acting treasurer, Elizabeth Muoio, raised the assumed pension fund return rate temporarily to 7.5%, a break for local governments that had faced hundreds of dollars in added payments when Mr. Christie lowered the rate to 7% last year. Though the short-term effect may be positive, it won't fix a system with a combined unfunded payments and medical-benefits liability that reached $184.3 billion in 2017, according to a March 5 commentary by S&P Global Ratings. The two biggest funds are forecast to be broke in 2024 and 2027.
Mr. Murphy met with the major ratings companies in New York earlier this month to outline his financial plan. New Jersey's credit rating is the second-worst among U.S. states, trailing only Illinois.
Mr. Murphy, a Democrat who replaced term-limited Christie on Jan. 16, said his goal is to give New Jerseyans more value for their tax dollars. He has promised additional spending on underfunded schools and transportation in a credit-battered state with an estimated $8.7 billion structural deficit for the fiscal year that starts July 1.
Senate President Steve Sweeney, a Democrat and the highest-ranking state lawmaker, was a perennial sponsor of a millionaire's tax during the Christie years, only to see the governor veto it seven times. In the wake of President Donald Trump's $10,000 limit on state and local property-tax deductions, though, Mr. Sweeney says the extra charge would drive more wealth from a state that already has the nation's highest property taxes.
He and Mr. Murphy now disagree on how to fatten state coffers. Last week, Mr. Sweeney outlined a proposal for a 3% surcharge on corporations earning more than $1 million annually, for an estimated $657 million. Mr. Murphy said he wouldn't accept it as an alternative to his plan.