Governor Murphy and the NJ State Legislature reached a last-minute compromise before midnight on July 1st, avoiding a shutdown of the state government. The new budget has implications for education from p-12 through post-secondary levels, including adjustments in school funding and first steps toward providing a free community college education for residents.
The tax implications of the new budget include:
• No increase in the sales tax. The loss of the additional sales tax monies will be partially offset by the U.S. Supreme Court’s decision to allow on-line retailers to charge sales taxes required by states.
• A tax increase on multi-millionaires for money earned after the first $5 million.
• A sales tax on short-term housing rentals, such as Airbnb.
• A surcharge on Uber and Lyft: 50 cents on single passenger trips and 25 cents on multiple passenger rides.
• An e-cigarette tax of 10 cents on each milliliter of liquid nicotine.
• An inclusion of $150 million for the Homestead Rebate Program to double the credits homeowners received this May.
• An increase in the state income tax deduction for local property taxes from $10,000 to $15,000, which would benefit about half a million households.
• An increase of $402 million in direct aid to schools, although some school districts will gain money and others will see funding cuts. As the school funding formula is revised, funds will shift over a period of seven years from schools deemed over-funded to those considered underfunded. It is anticipated that no school district will gain or lose over $3.5 million.
• A 2 percent cap on municipality spending increases.
• No legal marijuana law. The failure to pass a legal marijuana law will result in no anticipated tax revenues, which were sought as a needed revenue stream.
• An offer to tax dodgers. Those who owe back taxes to New Jersey will be given an opportunity to pay them without penalties.
• A surtax on corporations of 2.5 percent this year and then 1.5 percent in the third and fourth year, after which it will be phased out.
• Funding of $25 million for community colleges to begin the phasing in of free tuition for all students. While Governor Murphy could not persuade the legislature to agree to fund free community college education for all, they did begin to phase it in by providing low-income students with funding.
• Low-income workers who apply for the Earned Income Tax Credit will see a small increase of $53. This is a first phase that will provide these workers with an increase from 35 percent of the federal tax credit to 40 percent.
• An extra $242 million for needed repairs and improvements to NJ Transit without fare increases.
New Jersey educators are encouraged to be alert to the ongoing developments that affect education in the state.