Murphy Faces Pressure on N.J. Taxes, Jobs Growth in Second Term

(Bloomberg) -- Phil Murphy will start a rare second term for a Democratic New Jersey governor facing pressure to rein in taxes, fund mass transit and finish the job on Covid-19 recovery.

He’ll do it with the added challenges brought on by his unexpectedly narrow victory over Republican challenger Jack Ciattarelli, who has not yet conceded. After leading in recent polls by as much as 11 percentage points, Murphy was declared the winner Wednesday by the Associated Press. With 99% of precincts reporting as of Thursday, he led by 1.5 points -- 35,718 votes out of 2.5 million counted.

The 64-year-old incumbent confronts one of the highest unemployment rates in the U.S., and has been less stringent than some neighboring states and cities on vaccine requirements. Murphy has denied Ciattarelli’s accusations that he was holding off on a mandate until after the election, saying he was letting science and data drive his decisions, not politics.

Murphy’s win makes him the first Democrat since 1977 to win re-election as New Jersey governor. Past Democratic governors have been ousted over taxes and economic slowness.

Here’s what voters can expect from Murphy on some major issues:

Taxes

Murphy enacted a millionaire’s income tax during his first term and used the money to provide rebates for middle-class homeowners. He has pledged not to raise taxes in his second term. That doesn’t mean that New Jersey’s property taxes -- which are set and collected by local governments -- won’t continue to increase, as they have done each year for more than two decades.

New Jerseyans paid an average property-tax bill of $9,112 in 2020, the highest rate in the nation. Murphy’s predecessor, Republican Chris Christie, enacted a tax cap that has helped limit annual growth in recent years.

Murphy has worked to blunt the high cost of the taxes by increasing aid to schools and municipalities and giving tax rebates, credits and deductions. He has urged Congress to lift a $10,000 cap on state and local tax deductions, and has encouraged consolidation of New Jersey’s 21 counties, 566 municipalities, 611 school districts and 400 local authorities and fire districts. But he has not proposed a plan for actual tax reduction.

Jobs

Murphy’s Covid restrictions took a toll on New Jersey’s economy. Over two months, New Jersey lost 720,000 jobs, largely in leisure and hospitality, retail and health care. The state’s unemployment rate more than quadrupled in a month to 16.6% in April 2020. It went from being below the U.S. average to above it.

As of September, New Jersey had regained about 68% of jobs lost during the pandemic. The unemployment rate had recovered to 7.1% in New Jersey, but remains well above earlier lows. 

Murphy’s first-term job policies include a higher minimum wage and enactment of paid family leave. He also overhauled the state’s tax-incentive program and has recently lured several tech companies, including Fiserv, which pledged to add 2,000 jobs in Berkeley Heights, and HAX in Newark with 2,500. Netflix Inc. is seeking to turn an old army base in New Jersey into a production facility for film and TV, and Amazon Inc. is looking to add office space in Jersey City.

NJ Transit

NJ Transit’s ridership plunged by about 75% at the height of the pandemic and remains 45% to 50% of pre-Covid levels.

The agency has no steady funding source and continues to transfer funds from its capital-projects account to cover operating costs. 

Murphy has touted improved performance indicators, including more on-time percentages, fewer cancellations and increased investment in engineers, buses and rail cars. So far he has avoided fare increases, but NJ Transit is relying on federal stimulus money for operations.

Gateway Tunnel

Commuters are counting on Murphy to make sure the long-awaited Gateway rail-tunnel project continues to move forward.

Murphy broke ground in October on the Portal North Bridge replacement, a $1.6 billion part of the larger Gateway project aimed at reducing gridlock on the heavily traveled Northeast Corridor.  

The $12.3 billion project had stalled under former President Donald Trump, but has moved forward under the new administration. Construction is expected to take at least a decade. The project includes a new two-track tunnel beneath the Hudson River, plus the closing, rehabilitation and reopening of the 110-year-old North River Tunnel that serves Amtrak and NJ Transit commuter trains. 

Congestion Pricing

Murphy has vowed to fight New York’s plan to charge commuters who drive into Manhattan’s central business district.

The governor said he is not against the concept of congesting pricing because it would get drivers off the streets and help the environment. He says the proposed plan from New York’s Metropolitan Transportation Authority would result in some New Jerseyans being double-tolled. He also wants to make sure New Jersey gets some of the revenue.

More than 400,000 New Jerseyans commuted into New York before the pandemic.

Spending

Murphy increased state spending by more than $11 billion during his first term, to a record $46.4 billion. The latest budget included a record pension payment, free in-state public college tuition for low-income students, expanded pre-kindergarten, tax rebates and assistance paying rent and utility bills.

“He’s got to find a way to pay for what he’s created in the budget,” said Tom Bracken, president of the New Jersey Chamber of Commerce. 

With Murphy’s no-new-taxes pledge, the governor needs to boost revenue organically by growing the economy, Bracken said. 

While Murphy has long had a goal of making New Jersey fairer and stronger, he focused more on the fairer part, Bracken said. Now he needs to pay more attention to the business community to strengthen the economy, he said.

Debt 

Before the pandemic, Murphy had made debt reduction a priority. The state’s bond obligations had actually fallen for three straight years, ending fiscal 2020 with $44.4 billion -- still one of the highest debt loads among U.S. states.

When Covid struck, Murphy won legislative and court approval to borrow $4.2 billion amid concerns the pandemic would cause a revenue shortfall. Turns out, New Jersey had a $5.1 billion windfall.

But even with more revenue than expected, New Jersey was unable to pay off those bonds early. New Jersey was able to get a “very low interest rate,” Murphy said in a recent interview, in part because the bonds were structured to be non-callable, meaning they can’t be redeemed early.

Instead, Murphy’s administration plans to eliminate higher-cost debt. It has targeted about $3 billion for debt relief and $1.2 billion for prospective infrastructure projects, according to the governor.

Covid-19

Murphy’s approval jumped early in the pandemic to more than 70% as he held daily briefings and ordered shutdowns to contain the virus. His approval was 52% in a Sept. 23 poll by Monmouth University, as he met accusations his policies led to an increase of deaths at long-term care facilities. Murphy said his administration took to minimize the spread in nursing homes, including ordering operators to keep Covid patients separate from healthy ones.

New Jersey continues to crawl its way out of the pandemic, with 75% of its population having received at least one dose. Businesses have reopened, but many are having trouble finding workers, Bracken said. Masks are required in schools and “strongly encouraged” for unvaccinated people in public places.

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