Burlington County Times

Millionaires Tax, School Funding Debate Comes To First Budget Hearing

From security at churches, mosques and synagogues to transit, nursing homes, drug treatment centers and schools, no one piece of legislation is as consequential as the annual budget and appropriations act lawmakers and the state's governor are charged with crafting each year, and legislators on the Assembly Budget Committee heard an earful about those and other issues during Wednesday's hearing, the first of two scheduled public hearings in front of the panel.

Burlington County Times — March 20, 2019

By David Levinsky

TRENTON — New Jersey lawmakers kicked off their review of Gov. Phil Murphy's $38.6 billion state budget Wednesday by listening to hours of input from residents and stakeholders about the plan's impact on all manner of services and programs.

From security at churches, mosques and synagogues to transit, nursing homes, drug treatment centers and schools, no one piece of legislation is as consequential as the annual budget and appropriations act lawmakers and the governor are charged with crafting each year, and legislators on the Assembly Budget Committee heard an earful about those and other issues during the hearing, the first of two scheduled in front of the panel.

The Senate Budget Committee will also hold two public hearings, starting Thursday at the New Jersey Institute of Technology in Newark.

"Today marks the starting point of a long and very important process. A state budget should represent our priorities. It must be fair, responsible and reflective of the needs of the people of New Jersey," Assembly Budget Chair Eliana Pintor Marin said at the onset of the daylong hearing at the Statehouse.

"The governor's budget proposal is just that — a proposal. The budget that the Legislature will ultimately deliver to the governor will be different than the plan he laid out earlier this month. That is why what you say today before this committee truly matters," she added.

More than 75 people registered to testify. And while each was limited to about three minutes each, they still managed to give lawmakers plenty to think about relating to the budget, starting with its proposed income tax hike on incomes over $1 million.

The so-called millionaires tax proposed by Murphy is expected to generate $447 million in additional tax revenue by expanding the state's top 10.75 percent rate to earning over $1 million, rather than the current $5 million start. It's easily the most controversial component of Murphy's budget proposal, which also boosts funding for transit, public schools and other programs while cutting spending on public employee health care expenses by about $800 million.

Murphy and other supporters have described the increase as a matter of "tax fairness" to require the state's wealthiest to pay more, but legislative leaders like Senate President Stephen Sweeney, D-3rd of West Deptford, and Assembly Speaker Craig Coughlin, D-19th of Fords, have said they would oppose the increase, arguing that New Jersey's taxes are already too high and that the millionaires tax would cause more wealthy residents to leave the state.

Rather than raise taxes, the two lawmakers want to find additional savings that could offset the need for the tax increase.

A coalition of labor and progressive groups made the case for the tax increase both during the hearing and at a news conference before testimony started. Some speakers cited lucrative tax incentives awarded to wealthy corporations during former Gov. Chris Christie's two terms in office, as well as other tax reductions for businesses and the sunset of a prior income tax surcharge on millionaires.

"We can't pretend that eight years of Chris Christie and tax breaks for the wealthy at the expense of working people of this state didn't happen," said Ann Vardeman, program director of New Jersey Citizen Action, at the news conference. "We actually need to right the ship. It's important. It's fair. It's about fairness because there's growing income inequality."

Brandon McKoy, president of the left-leaning think tank New Jersey Policy Perspective, said the frequently cited argument that the wealthy have fled the state for more tax-friendly locations is proven false by tax data showing that the number of residents and families earning more than $500,000 a year in the state has grown since 1994.

"Millionaires tax flight is a myth. Wealthy households and wealthy earners are here in New Jersey because we have the resources that make them successful," McKoy said. "If we want to ensure that those resources remain high quality, we need to keep on pushing for policies that will fund this budget in a responsible way."

Sean Spiller, vice president with the New Jersey Education Association, the state's largest teachers union, said the wealthy should pay their fair share so New Jersey can continue to have great schools and a strong economy.

"It probably doesn't matter that much to millionaires but it certainly matters to the rest of us that they are paying their fair share to allow us to put forward investments," he said.

Mike Egenton, executive vice president with the New Jersey Chamber of Commerce, spoke against expanding the top tax rate, arguing that it would hurt businesses of all sizes in the state, including small ones whose owners pay taxes on their business' profits through their personal income tax returns.

"In relation to the size of his proposed budget, the revenue from this tax increase is minimal, however, the impact on our job creators would be tremendous," he said. "We cannot afford to lose these entrepreneurs to other business-friendly states ... We respectively encourage the committee and legislative leadership to look for additional cost savings to offset this tax."

Egenton also made the case that a "robust" tax incentive program to lure and retain businesses is still needed. The state's current incentive programs are set to expire this summer and Murphy wants them replaced with new ones that are capped and more narrowly focused.

"We fully recognize the need for accountability and transparency, at the same time we strongly believe our state needs a robust economic development initiative to remain competitive with surrounding states and globally," Egenton said.

Besides tax policy, the committee heard from both sides on an ongoing debate over school funding.

While Murphy's budget increases direct formula aid for public schools by $206 million, the additional funding will not be distributed to every school district in the state. Nearly a third of the state's public districts will receive less aid under the governor's plans, including 18 in Burlington County.

The reductions for some districts is due to a new school funding law that seeks to correct funding shortfalls and discrepancies that had plagued hundreds of districts, particularly those that saw their enrollment rapidly increase. The law kept the state's basic school funding formula in place, but made changes to the aid awards so that districts that had been severely underfunded received large increases, while others that have experienced enrollment reductions lost aid.

Chesterfield was one of the biggest beneficiaries of the increased aid and the town's committeewoman, Andrea Katz, testified that the district has used the additional funding for technology and security upgrades, staff hires, and new curriculum and materials.

"Our library can actually purchase new books," Katz said.

School officials from districts like Toms River and Freehold that are losing aid testified that the funding formula still has flaws and that their students were being hurt in order to correct the inequities that plagued districts like Chesterfield.

Toms River Superintendent Dave Healy also said the current formula punishes districts like his that have low taxes.

"The truth is we tax less because we spend less. The current funding formula does not account for this. It makes us victims of our own efficiency," Healy said.

Assemblyman John Burzichelli, D-3rd of Paulsboro, who was among the most outspoken lawmakers for school funding changes last year, lamented that the debate over fair school funding seems to never end.

"The state's school funding formula haunts this legislature year after year," he said Wednesday. "We will take your comments under advisement."

Also Wednesday, lawmakers heard repeated requests for additional funding from scores of service providers for the disabled, elderly and poor. Most said they were appreciative of the funding that Murphy's budget proposes, but that additional money or higher reimbursement rates are required to meet growing needs or to retain or hire new workers.

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