N.J. Governor Murphy Finds Fellow Democrats Are Biggest Obstacle

(Bloomberg) -- Phil Murphy came to the New Jersey governor’s office painting Republican President Donald Trump as the most serious threat to his progressive agenda. A year later, Murphy’s fellow Democrats are proving the thornier obstacle.

In his first State of the State speech on Tuesday, Murphy will tout his successes, which include tighter gun control, paid sick leave, expanded pre-kindergarten, college tuition aid for the poor and restored women’s health funding. Meatier items, though, have stalled or failed, including legal recreational marijuana, a $15-an-hour minimum wage and some of the tax increases he sought to fund his spending proposals.

After eight years of roadblocks by Republican Governor Chris Christie, Democrats who control the legislature saw wide-open opportunity with Murphy. Still, they have refused to rubber-stamp his proposals, forcing the governor, a former finance executive and newcomer to elective office, to the table. While Murphy during his speech will stress he’s open to negotiating, it’s clear already that his budget introduction next month will spark additional battles, as top lawmakers say no more tax increases and Murphy refuses to rule them out.

"You hope there would be a little bit more cooperation,” Howard Cure, director of municipal research at Evercore Wealth Management, said by telephone. “There seems to be real issues with the legislature and governor."

Tax Bills

Murphy, 61, campaigned on a strengthened middle class, a return to economic vibrancy and tax fairness. He also cast himself as a force against Trump, whose anti-immigrant views and $10,000 limit on state and local deductions for federal tax purposes made him unpopular in a high-cost state that relishes its diversity. His attorney general, Gurbir Grewal -- the first Sikh in the U.S. to hold that office -- has taken part in at least two dozen lawsuits, briefs and letters, often with colleagues from other states, to challenge Trump’s policies.

Business groups, meanwhile, remain wary of Murphy and his policies, especially those that will increase their costs. And a study this month by the New Jersey Business and Industry Association cited 12 deficiencies that are obstacles to Murphy’s efforts to reclaim New Jersey’s role as “the innovation state,” a reference to a faded technology and pharmaceutical corporate base that once made it an international envy.

New Jersey drew just $781 million in venture capital investment in 2017, compared to $12.3 billion in New York, the study found. From the National Science Foundation college and university program, New Jersey got $157 million; New York received three times as much. While 8,603 patents were awarded to New Jersey residents, almost double went to those from Massachusetts.

“What’s of significant concern as we go through the budget process is the fact that he stated, ‘Everything is on the table,’ including higher taxes,” Michele Siekerka, the business group’s president, said in an interview. “That puts an immediate chilling effect on our businesses and our economy.”

Murphy made the remark to reporters in December, when asked whether tax increases were a possibility for the next fiscal year. His first budget raised more than $1 billion in new or increased taxes on high earners, corporations and users of "sharing economy" staples Uber Technologies Inc. and Airbnb Inc.

On the environment, the state chapter of the Sierra Club -- which endorsed Murphy for governor -- is having some misgivings, according to Jeff Tittel, its executive director.

Though Murphy signed an executive order with a goal of 3,500 megawatts of offshore wind energy, his administration hasn’t blocked plans for four natural-gas power plants or the 118-mile (190-kilometer) PennEast Pipeline Co. natural-gas line. His administration also maintained Christie’s loosened clean-water rules, carried on Christie’s tradition of raiding an environmental fund to patch a budget hole and enacted a ratepayer-funded $300 million nuclear-industry subsidy -- all against the Sierra Club’s recommendations.

‘Very Disappointing’

“It’s been a very disappointing first year,” Tittel said in an interview. “This has been an administration that is more about talking about climate change than doing anything about climate change.”

Even as New Jersey’s credit is second-lowest among U.S. states, after Illinois, Wall Street is showing confidence. New Jersey Transportation Trust Fund bonds sold on Jan. 9 were almost three times oversubscribed, which pushed the deal to $750 million from $500 million, said Jennifer Sciortino, a treasurer’s office spokeswoman.

Pension Woes

Murphy, a retired Goldman Sachs Group Inc. senior director, resonates with investors because of his commitment to full pension payments and his willingness to raise taxes, said Judith Ewald, senior credit analyst at Western Asset Management. That’s in contrast to Christie, who backtracked on a pledge of higher pension payments, made tax resistance a centerpiece of his failed presidential campaign and left office as the most unpopular governor ever.

New Jersey has “gained ground toward structural balance and we’re not there yet, but the fact that the direction has turned, I think, has played well with investors and to some extent the rating agencies," Ewald said in an interview.

During his speech, Murphy is expected to talk extensively about New Jersey Transit, the nation’s largest statewide mass-transportation provider that suffered years of budget starvation under Christie. Leadership has accelerated engineer classes, revamped a crippled procurement process and put a new emphasis on customer communication. The railroad met a Dec. 31 federal deadline to install emergency-braking software on its locomotives -- remarkable, given that the task was just 12 percent done when Murphy took office. Customers inconvenienced by equipment shortages during the work got 10 percent discounts.

Murphy also signed bipartisan legislation to expand NJ Transit’s board of directors and increase transparency, the result of 18 months of legislative hearings begun during the Christie administration that found an agency riven by a funding crisis, patronage hiring, safety violations and low morale.

“There’s a lot of momentum right now and we have to keep that momentum going,” said Janna Chernetz, deputy director of Tri-State Transportation Campaign, which advocates for mass transit in New York, New Jersey and Connecticut. “That’s going to take the legislature as well as Murphy.”

--With assistance from Danielle Moran.

To contact the reporter on this story: Elise Young in Trenton at eyoung30@bloomberg.net

To contact the editors responsible for this story: Flynn McRoberts at fmcroberts1@bloomberg.net, Stacie Sherman, William Selway

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