New Jersey moved dramatically closer to a second government shutdown in as many years on Friday, even as legislative leaders agreed for the first time to support higher taxes on some millionaires, a proposal Gov. Phil Murphy rejected as “symbolic.”
Lawmakers emerged grim-faced from the second of two meetings in the governor’s office and immediately scheduled a press conference at the Statehouse.
With barely a day left to pass a budget before the end of the fiscal year, Senate President Steve Sweeney and Assembly Speaker Craig Coughlin described the proposal they offered as their most significant overture to date.
In addition to agreeing for the first time to support some version of a higher tax rate for millionaires, they said they also agreed to cut down the amount they want to tax corporations and provide $25 million in funding for community colleges, half of what the governor had sought.
“I wish I had better news, but I am bitterly disappointed we weren’t able to reach an agreement with the governor today,” Coughlin said at the Statehouse press conference.
Murphy, he said, offered “no compromise, no counterproposal. He rejected it out of hand.”
Coughlin and Sweeney, who has steadfastly opposed higher income taxes up until now, agreed to impose a 9.95 percent tax rate on those making more than $5 million. Murphy had proposed a 10.75 percent rate on all people earning more than $1 million, up from the current 8.97 percent.
Murphy said at his own news conference late Friday afternoon that he saw “a glimmer of hope” when Sweeney and Coughlin “agreed that we need to ask the wealthiest to pay more to pay for the priorities that we share.”
He called it “a very good step,” but said it fell woefully short and amounted to nothing more than “a symbolic thought.”
“When you come up with a symbolic offer just to say you can check the box — and we have had real, substantive movement on things like corporate business tax, being creative around millionaire’s tax — I have no time for that,” Murphy said. “They know exactly the genuineness with which we have approached this and will continue to approach it, by the way.”
The lawmakers said they also agreed to cut down on their proposal to tax some corporations, offering to impose a 3 percent surcharge on all companies earning more than $1 million per year. That rate would fall by 1 percent each year before being eliminated.
The budget lawmakers sent to the governor this month would raise the corporate tax rate from 9 percent to 11.5 percent for companies that earn between $1 million and $25 million per year, and to 13 percent for larger firms — the highest rate in the nation. The tax would sunset after two years.
The lawmakers did not offer to support a restoration of the state sales tax to 7 percent, as the governor has proposed, but Murphy said he’d be willing to drop the issue if they can get to a “good place” on the corporate business tax and “as long as we have a credible millionaires tax as part of the strategy.”
“I am willing to compromise and always have been on what solutions we use,” the governor said. “What I am not going to compromise on is the need for a real sustainable solution. I’m not going to bargain away that principle for the sake of a deal that I know weakens our future and that remains our sticking point.”
The governor’s tough negotiating tactics left Democratic lawmakers frustrated and openly hostile. The Senate president said Murphy seemed like his Republican predecessor — a jab both sides have lobbed at the other in recent weeks.
“His behavior is exactly like Chris Christie’s, but he smiles more,” Sweeney quipped.
He said negotiating with Murphy was “insanity” and that he felt as though lawmakers were talking to themselves, with Murphy offering “no compromise. It’s all been one way.”
“This isn’t a game — it’s real,” Sweeney said. “We’ve done everything we possibly can to work with this administration, only to be rejected time and time again. He’s more concerned with protecting corporations that had billion-dollar windfalls from [President] Donald Trump.”
Murphy and his supporters say that’s ludicrous.
Lt. Gov. Sheila Oliver, who stood with Murphy at the press conference and was part of the discussions with lawmakers, said the lawmakers were the bad actors.
“I have never seen the level of obstructionism come from the legislative leadership as I am seeing in this cycle,” Oliver, a former Assembly speaker, said. “They do not want to work with Governor Murphy.”
The disagreement makes a shutdown almost inevitable. Murphy and lawmakers have until midnight Saturday to get a spending plan in place; otherwise the governor is likely to declare a state of emergency that would close much of state government.
Murphy has vowed to reject the $36.5 billion budget the Legislature sent him. He has said he could line-item veto the plan, cutting $855 million out of it and enacting the spending plan on his own. He could also veto it outright, sending it back to the Legislature, or issue a conditional veto that the Legislature would need to approve.
The governor said he convened another meeting of his Cabinet on Friday evening to weigh his options ahead of the budget deadline. Asked if the state would shut down, or if he would line-item veto the budget lawmakers sent him this month, he merely said that “all options remain on the table.”
The Senate canceled its planned Saturday voting sessions, though the Assembly said it would go ahead and pass some bills, including a measure to keep state parks open in the event of a shutdown. The Senate has a session scheduled for Monday.
The lawmakers said they had no plans for another meeting with the governor, but stand ready to talk if he reaches out. Sweeney said he would be in Trenton on Saturday, ready to negotiate.
Assemblywoman Eliana Pintor Marin (D-Essex), the Budget chairwoman, said she thinks there’s still a chance to come to terms this weekend.
“I leave here with a lot of hope today that we will get a call back, either tonight or tomorrow,” she said.
Murphy said he’s still open to compromise but will not give in to a proposal he doesn’t like.
“I will go down with the ship trying to protect the investments we care passionately about,” Murphy said. “We won’t wake up tomorrow different people than we woke up today.”
Even if a deal can be reached, the leaders would need to get a three-quarters supermajority of votes to immediately get a bill onto the floor of the Legislature.
Assembly Minority Leader Jon Bramnick said Republicans will not provide Democrats with the votes needed to skip the waiting period.
“They are not going to support new taxes or a new budget unless it has substantial cuts, and my guess is it’s not going to have substantial cuts,” Bramnick said. “They have now mentioned every possible tax, other than taxing the air, that you could possibly think of. Everything from the Jersey Shore to my income taxes. This is something that the public needs to know on July 4 weekend. They need to know what is going on in Trenton.”
