NJ faces a $ 3B budget hole and Trump’s federal abbreviations can make things worse – nj.com

Currently, New Jersey is staring at over $ 3 billion in a structural deficit, as governor Phil Murphy is preparing to disclose his next state budget proposal this month, three sources said with direct knowledge of the cost plan to NJ Advance Media.

In Trenton, he is worried that the state’s financial picture can get worse if President Donald Trump’s new administration follows billions in federal funding this year as part of the US government ongoing.

The Democrats who control the government’s government are now fighting to find ways to reduce the estimated hole of $ 3.7 billion before Murphy delivers his budget address on February 25th. Structural deficit occurs when the state spends more money than it will take taxes and other sources of revenue, having to immerse itself in its surplus to balance the taxpayer -funded budget.

Dark numbers and uncertainty about what is going to happen in Washington could mean difficult solutions, such as increasing taxes and reducing services, are on the horizon.

Murphy says the cost of the state is deliberate to help recover from Kovid-19’s pandemic. But with the threat of a fiscal scale, which has been hanging in the last year of service, the governor’s administration has already frozen the increase in salaries for some state workers, restricted hiring and asked state agencies to prepare for a 5% reduction in costs in the upcoming 2026. Fiscal year budget.

The table is also potential increases in online game tax and eliminating sales tax on things such as interior design and bowling alleys, sources said, although there are currently no more talks on tax increases.

A source close to Murphy said the governor’s plan would eventually include a structural deficit between $ 1.5 billion and $ 2 billion, which would still require the state to reach the surplus. State legislation requires New Jersey’s budget to be balanced.

State Senator Andrew Zwicker, D-Middlesx, said, above all, the possible decline in federal aid-on which countries usually rely to strengthen their budgets-“huge concern”.

“We have already started in a difficult place,” says Zwicker, a member of the Senate Budget Committee. “These threats from federal cuts will be provided not only on education but also on Medicaid. These are abbreviations that will have an immediate impact. “

Murphy’s service declined to discuss the specifics of what may be included in the governor’s budget plan, as his team is still working on it.

But spokeswoman Stella Porter said Murphy, a Democrat, is “hope that Republicans in Congress will not reduce critical social services and infrastructure programs to ensure that wealthy taxes are reduced.”

“It is likely that Congress will not adopt a new cost legislation before the governor finalizes his budget proposal this month,” Porter added.

After Murphy reveals his proposal, the governor and the best legislators in the state legislative body, controlled by the Democrats, will negotiate a final budget, to which it is due to July 1, the beginning of the fiscal year 2026.

Republicans have expelled Murphy for the big jumps in costs – and say that the guilt of the state’s prospects falls on his administration, not the federal government.

“He will paint a pink picture, show concern about the federal cuts, accuse them of a problem he created,” says State Senator Decan O’Scantolon, R-Memut, Republican in the Senate Budget Committee, “Murphy told Murphy. “He will go through another year without having to make a difficult decision at all, digging the hole extremely deep to deal with the next governor and legislation.”

More than a dozen candidates are running this year to succeed Murphy. One thought in Trenton: While this budget will be difficult, the first under a new governor next year will be even more difficult.

“This is a mess,” O’Schanlon said. “We are probably in the oldest form, maybe we have ever been.”

Murphy’s budgets have increased the costs annually in the last seven years, with a record price last year is 63% more than the final budget of the former Republican government, Chris Christie.

Part of this is because Murphy and colleagues Democrats have increased the distribution of the country’s long -term pension system and added money to school formulas for help and tax relief programs. Credit agencies have upgraded state ratings during Murphy’s term. The governor says he is trying to resolve the fiscal problems he inherited.

The latest budgets were also enhanced by a wave of federal money from coronavirus incentives and included excess billions of dollars.

Murphy said part of the reason for this surplus is that the state deliberately spends more than he did to stimulate the economy after the pandemic. The $ 56.6 billion state budget, which Murphy signed last summer, included a $ 2.2 billion structural deficit. This means that the state was scheduled in the budget to spend about $ 2.2 billion more than necessary, and employees had to withdraw from the country’s surplus for $ 6 billion to help cover the hole.

The gap has grown to approximately $ 3.7 billion as the state is facing an uncertain economy as well as a shrinking of revenue and pandemic aid.

Murphy said during a television interview in November that the administration asked his state departments to prepare for cuts because “we cannot manage a structural deficit forever.”

“We want to pull our belt,” he said.

Another source close to Murphy said it was “really important to have a healthy surplus” in the upcoming budget. The surplus can remain about $ 6 billion, a legislative source said.

The legislative source said “we will not allow everything” with the next budget, but the aim is to “take meaningful steps to undergo the structural deficit.”

Leaders will spend the coming months by going through everything with a “comb with fine teeth so that we can get to a place where we reduce significantly without hurting people,” the source added.

The sources spoke on condition of anonymity to discuss the situation honestly.

Murphy said in an interview with NJ Advance Media last month, this will be a “painful” budget cycle.

“And we’re not alone. This is an American phenomenon at the moment, “he added, noting that other countries face cuts and shortages.

“But like everything else, we are trying to keep all our strength for the things we are dear,” added a governor, limited by a term blood of things that are less in our main interests as a country. To continue to see that he is fiscally responsible. To do our best to defend the most vulnerable among us. “

Washington, meanwhile, is Wild Cardon. In the three weeks, since Trump took office, his administration moved to freeze $ 3 trillion state subsidies that support programs that benefit from all babies and elderly citizens of disaster and disaster victims. Federal judges in multiple jurisdictions have blocked this move, questioning its legitimacy, since the US constitution gives control of congress over costs.

This happens when Trump joins Technological Billionaire Elon Musk to monitor unprecedented efforts to renew federal costs under the new US or DOG Efficiency Service. The goal, say Trump and Musk, is to eradicate the waste.

State Senator John Burzicheli, D-Gloucester, also a member of the Senate Budget Committee, said the reduction of federal aid could affect “sensitive areas” such as Medicaid and special education.

“There is nothing to do right now, but to sit down and wait to see from the federal side,” Burzicelli said. “As we can see with this president, things are changing hourly. Who knows what’s going on? “

New Jersey received $ 22 billion in federal funding in support of 609 state programs in the last fiscal year, according to a recent Murphy cabinet report.

The state receives $ 1.2 billion alone from the US Department of Education. Trump and allies said they were planning to remove this agency.

“If we have to learn any or all, it will be the most difficult,” said a legislative source.

Federal funds also help to pay for housing accommodation and food assistance for residents of low incomes, prisons, environmental programs, health and medicinal studies and mental health services, among other items.

A source close to Murphy said the situation was “difficult to plan”, noting that 15% of the state labor force was also funded federally.

O’Sclanlon, the Republican MP, has admitted that federal abbreviations from the Republican president can make things dark.

“But I won’t let them get out of doing so,” he told New Jersey’s democratic leaders. “He can add, yes. But this is uncertain. We don’t know this at that moment. “

Despite all the questions, the state is expected to retire a full payment again and fully finance the school financing formula – two distinctive features of Murphy’s term.

Unlike last year – when some leaders sailed a proposal to increase the country’s sales tax – there will probably be no appetite for widespread tax increases or reduction of services, given that the whole state Assembly is on the newsletter this fall, Sources stated.

One possible move, sources said, may be an increase in online taxes, which are taxed here at a much smaller rate than neighboring countries (14% compared to 40% to 50% in New York, Delaware and Pennsylvania).

But another legislative source said it could be a difficult sale. Maintaining the tax is designed to give New Jersey a competitive advantage in the online gambling market, the source said.

“I don’t think it’s low hanging,” the source added, saying it could be “difficult to pass.”

Peter Chen, a senior analyst in New Jersey’s policy, said he had not heard the deficit could reach up to $ 3 billion. But the figure did not surprise him, especially if he included more money for the Stay NJ, a program led by the speaker of the State Assembly Craig Kftin, D-Middlesx, which will reduce ownership tax by up to 50% for the primary residences for those who are 65 and older and earn less than $ 500,000 a year. The state is increasing funding for the billions of dollars, and the payments will begin in 2026.

The prospect of NJ’s policy, a leftist cerebral tank, does not support Stay NJ and likes it less now in this economic climate, Chen said.

“This is not the best time to finance a regressive tax credit for homeowners,” he said. “Any increase in structural deficit is real care.”

Sources say the budget will include funding for the program, despite fears how the state can afford it. Officials will have to enter only half of the account now, as the full payments will not start by the first budget cycle after Murphy leaves.

Chen claims that $ 6 billion in New Jersey’s surplus is “as a month of state funding.”

“And who knows what will happen at the federal level,” he said.

NJ Advance Media Staff Writer Geckon contributed to this report.

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