New Jersey Gov. Phil Murphy on Tuesday proposed raising the state's general fund contribution to the New Jersey Pension Fund, Trenton, to $3.75 billion for the fiscal year beginning July 1, an increase over the $3.2 billion slated for the current fiscal year.
Mr. Murphy made his recommendation in his budget message to a joint session of the New Jersey legislature in Trenton, according to a transcript of his remarks.
Although the proposed amount is the largest in the pension fund's history, it still only represents 70% of the actuarially determined contribution. The current fiscal year's contribution represents 60% of the actuarially determined contribution.
Mr. Murphy has pledged to increase state contributions by 10-percentage-point annual increments — a practice started by former Gov. Chris Christie — until 100% annual contributions are reached.
The general fund contributions augment the estimated $1 billion annual contribution to the $70.9 billion pension fund via the New Jersey Lottery. Mr. Christie signed a law in July 2017 transferring the lottery to the pension fund as a pension fund asset.
Last month, the state Treasurer's office issued a request for qualifications, seeking financial advisory firms that could help determine if converting other state assets — such as roads, transit facilities and airports — could be used like the lottery to help support the pension fund.
Mr. Murphy's budget proposal contains about $1.1 billion in savings, most notably in public employee health benefits, as well as tax increases on the state's wealthiest residents.
For the current fiscal year, Mr. Murphy signed a law increasing taxes on residents who earned $5 million or more. For the upcoming year, he wants the tax extended to those earning $1 million or more, according to the budget document.
Negotiations with the Legislature portend to be contentious given legislators' reluctance to raise taxes.
"I understand the budget I am proposing today will not be identical to the one I will ultimately sign," the transcript of Mr. Murphy's remarks said. "We will talk, we will negotiate, and we will compromise. That is as it should be."
Beyond the negotiations for the next fiscal year, independent sources have raised concerns about the current fiscal year, saying the state's revenue through January is behind the revenue predictions the governor made.
Total tax collections through January 2019 were 2.9% higher than the corresponding year-ago period, a Feb. 21 report by the Office of Legislative Services said. The governor's budget for the current fiscal is counting on a 7.2% full-year growth vs. fiscal 2018, the report said.
"Expectations that weak estimated payments in December would recover in January were not met," the report said.
"Continued revenue growth below current fiscal 2019 budget targets could point to longer economic and revenue pressure," a Feb. 25 report by S&P Global said.
For example, gross income taxes through January were down 6% vs. the same period last year. The governor's budget for the full fiscal 2019 calls for a 5.4% gain vs. the previous fiscal year.
"While a major portion of income tax is received in April ... the extended revenue shortfalls in the first half of the year will make catching up by the end of the year more difficult," S&P said, "even if currently slow revenue trends reverse."
