New Jersey Legislature passes $46.4B FY22 budget

The New Jersey Legislature on Thursday afternoon approved a $46.4 billion budget for FY2022, the largest in the State’s history.  Passing along party lines in the Democratic-controlled Senate and Assembly, the election year budget benefits from a $10 billion surplus (a combination of updated State tax revenue projections and a Federal COVID relief windfall).

The final budget includes a $505 million payment into New Jersey’s pension fund, on top of the $6.4 billion promised by Governor Phil Murphy when he presented his draft budget in February; it sets aside $1.3 billion for a Rainy Day Fund, a restricted use account to be used to guard against an economic slide; and it establishes a $3.7 billion debt defeasance fund to be used for paying down existing debt and avoiding future debt.

The budget also includes the following investments:

• Middle Class Tax Rebate: In Fiscal Year 2022, over 760,000 New Jersey families will receive an up to $500 tax rebate due to the Millionaires Tax enacted by the Governor and the Legislature last fall. Families will receive these rebates over the summer. The estimated program cost is $319 million.
• Updating the Homestead Benefit Base Year to 2017: The Fiscal Year 2022 Appropriations Act will update Homestead Benefit payments so that they are based on 2017 property tax information, which is the most recent payment information available, instead of 2006 records. This change is estimated to increase the average benefit for seniors and disabled homeowners by over $130 and the average benefit for lower-income homeowners by $145. The estimated program cost is nearly $80 million.
• Child and Dependent Care Credit (CDCC) Expansion: This budget proposes expanding the CDCC that the Governor and Legislature enacted in 2018 so that it is both available for families making up to $150,000 and refundable. This change will benefit over 80,000 more families, and increase the average credit for those making under $30,000 to $277. The estimated cost is $17 million.
• Extending the Veterans Property Tax Deduction to Peacetime Veterans: The Appropriations Act will support the expanded deduction approved through the 2020 ballot measure. The estimated foregone revenue cost is $15 million.
• Expanding the Earned Income Tax Credit (EITC) Age of Eligibility of 21 to 18 and to Those Over Age 65: The Governor and the Legislature have provided meaningful middle-class tax relief by boosting the EITC from 35 percent to 40 percent since 2018. Last year, the Governor led on expanding eligibility to an additional 60,000 New Jersey residents by lowering the minimum age from 25 to 21. In Fiscal Year 2022, Governor Murphy and the Legislature will expand eligibility to those 65 and older without dependents and to those as young as 18, which is projected to help another 90,000 residents – roughly 70,000 over 65; and 20,000 between the ages of 18 and 21. The estimated foregone revenue cost is $13 million.

Republicans and some interest groups criticized the budget process as lacking transparency and opportunity for input.  Governor Murphy has several days to sign the budget in order to meet a  July 1 requirement for a balanced budget to be in place.

Read the statement of the Senate Budget & Appropriations Committee that accompanied the budget bill when it was reported favorably from committee.