Murphy’s Progressive N.J. Agenda Has More Obstacles in Second Term

(Bloomberg) -- New Jersey Governor Phil Murphy on Tuesday pledged to make the state a more equitable place to live without raising new taxes in his first major policy speech since narrowly winning re-election.

The retired Goldman Sachs Group Inc. senior partner became the first Democrat in four decades to win a second term in November by 3.2 percentage points, an unexpectedly tight race that stunned the state. 

Almost two years into the pandemic, amid a spike that pushed the positive rate of infections past 31%, Murphy is defending Covid-19 precautions against critics who say they’re too stringent: He declared a 30-day public health emergency on Tuesday after the legislature failed to renew dozens of temporary safety orders and directives.

Murphy’s State of the State speech -- which he taped and aired virtually due to the winter Covid surge -- didn’t directly address the Election Day divide. But he appealed to nearly half of the state that didn’t vote for him and promised to make New Jersey a fairer place for all residents when he begins his second term on Jan. 18.

“There are many who do not yet feel your place is secure in this progress,” Murphy said. “And it is you to whom I recommit my efforts. Your place is set. Your seat is here.”

Past Promises

Most of the speech, however, focused on past promises of economic growth, aid to working and middle-class families and affordable healthcare.

“We have greater tax fairness,” Murphy, 64, said. “We’ve cut taxes for our middle-class and working families, and our seniors, fourteen times. And I commit to you now that the state budget I propose in a few weeks won’t raise taxes.”

Though he touted more state budget aid to schools as a form of property-tax relief, he didn’t air any concrete plans to reduce the largest such homeowner burden among U.S. states. Opinion polls consistently identify the annual tax bills, averaging more than $9,000, as residents’ biggest complaint. He also committed to lower prescription costs, but noted that lawmakers will have to be on board.

Murphy this term must deal with a legislature that has a smaller Democratic majority. Gone is Democratic Senate President Steve Sweeney, who helped pass some of Murphy’s first-term priorities, and who lost his own stunning re-election race to a Republican truck driver. 

Republicans and even some Democrats have called much of Murphy’s agenda out of step and unaffordable. 

“The message is clear of the so-called red wave that rolled through last November,” Republican Assemblyman John DiMaio said in a statement. “Our residents pay the highest property taxes in the country. While the patchwork of progressive programs has made life less affordable for people both parties want to help.”

Bob Hugin, chairman of the state Republican Party, also criticized the governor’s emergency order, which includes masking for schoolchildren.

“We are putting Democrats in every office up for election this year on notice: We will make sure voters hold you accountable for the continuing decline in our children’s mental health and any other consequence of the arrogance Phil Murphy has displayed today,” Hugin said in a statement.

Property Taxes

During his first term, Murphy put minimum wage on a path to hit $15 in 2024, expanded paid family leave, enacted free community college for low-income students, strengthened the state’s gun laws and expanded voter protections. He pledged to sign a bill guaranteeing a woman’s right to choose, amid a national debate over abortion.

“I will sign this into law this week,” Murphy said. “And I am especially proud that we are getting this done before the United States Supreme Court renders its ruling challenging Roe v Wade, which it is poised to overturn.”

Murphy in 2020 enacted a tax that increased rates paid by residents making more than $1 million to 10.75% from 8.97%. “When we have tax fairness, we can continue our historic investments in our pension systems and in our middle-class families,” he said in 2020.

Indeed, the income has been used, in part, to provide rebate checks of as much as $500 to roughly 760,000 households. In November, Murphy became the first New Jersey Democratic governor since 1977 to win re-election.

Property taxes remain highest among U.S. states, averaging $9,112 in 2020. A state comptroller review last week of New Jersey’s corporate tax-breaks program found positive reforms, as Murphy had vowed, but still short on transparency and slow to revoke unearned benefits. Murphy a year ago authorized $14 billion in such incentives to replace a troubled system.

More immediately, the state’s 79 acute-care hospitals are bracing for as many as 8,000 virus-infected patients, nearing the high in April 2020. At the same time, the state’s 6.6% unemployment rate in November was more than 2 percentage points above the U.S. average. 

“People are angry,” Sweeney, referring to the overall results of New Jersey’s November election, said in an interview. Sometimes allied with Murphy, Sweeney was unseated on a conservative tide in his southern New Jersey district. “We’re not talking about the economy, not talking about getting back where we want to be.” 

Murphy spokeswoman Alyana Alfaro declined to comment on Sweeney’s remarks.

Financial Snapshot

The state’s financial picture has improved despite Republican predictions of economic devastation wrought by Covid and Murphy’s $11 billion increase in annual state spending. New Jersey started the fiscal year on July 1 with a $10.1 billion surplus, almost $4 billion higher than what the Murphy administration had forecast a year earlier. That was the result of a two-month surge in revenue collections in April and May, for an historic high.

Like California and Texas, New Jersey has seen revenue supercharged by retail sales beyond pre-pandemic levels. Sales tax revenue rose 13.9% to $953.6 million in November, according to the latest data from the New Jersey Department of Treasury. Year-to-date collections totaled $4.06 billion, or 12.1% higher than the same period last year, an influx of cash that Murphy was criticized for not funneling toward taxpayer relief.

In addition, 60% of the $6.2 billion in federal Covid stimulus aid remained unspent as of October. The state has until 2024 to decide how to use the money, which Murphy has said he won’t use to plug holes or start programs that need funding after federal aid expires.

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