A Budget Showdown Looms, and a New Governor Is Tested

For the first months of his tenure, Gov. Phil Murphy enjoyed the fruits of Democratic control in New Jersey, easily winning the Legislature’s approval on a laundry list of progressive initiatives, including a package of stringent gun laws, equal pay for women and a significant expansion of automatic voter registration.

But with a budget deadline of June 30 looming and the memory of a state shutdown still fresh following the infamous trip to the beach by former Gov. Chris Christie last year, the Democratic governor and the Democratic legislative leadership are at odds — with each side staking out vastly different views over how to raise revenue to finance an ambitious progressive agenda.

Murphy, a Wall Street executive who had never held elected office before, argues that his plan to raise nearly $1.5 billion in taxes is necessary to set the state on a sustainable financial course. The powerful Senate president, Stephen M. Sweeney, is loath to increase the burden on tax-weary residents and instead has proposed short-term revenue sources such as a temporary tax on corporations and audits that could identify cost-saving measures.

Now Murphy faces his first big test as the state’s 56th governor: Does he stand his ground and risk a government shutdown and civil war among fellow Democrats, or does he compromise on tax pledges he made to voters to gain lawmakers’ support for his priorities.

Amid increasingly acrimonious budget negotiations, Murphy took his tax-centric budget pitch on the road Tuesday and wrapped it around a chronic concern in New Jersey: public transit.

Flanked by his transportation secretary and the executive director of New Jersey Transit, Murphy made an impassioned plea for his proposed budget, arguing that opposition to its revenue sources threatens investment in the state’s beleaguered transit system.

“For us to truly remake New Jersey Transit and ensure that this progress isn’t more of another in a long line of Trenton’s broken promises, then we can’t have another one-shot or two-shot infusion once every decade and expect to fund a safe and reliable mass transit system,” Murphy said at an appearance at the Trenton train station.

So far, neither side has shown inclination to compromise. On Monday, Sweeney and Craig Coughlin, the assembly speaker, presented their budget proposal, which did not include any of Murphy’s proposed tax increases.

Sweeney argues his short-term solutions are meant to incentivize future cost-cutting.

“My point is you’re just bringing more money in to run government instead of trying to fix what’s wrong with government,” he said in an interview.

Murphy vowed to veto the budget, dismissing the Legislature’s funding sources as “gimmicks'’ — stopgap measures that would not yield any financial stability. Instead, he said, his tax plan offers a more permanent and sustainable solution.

The governor has proposed raising revenue by imposing new taxes on the wealthy and raising the sales tax from 6.625 percent to 7 percent. Sweeney, who initially supported a so-called millionaire’s tax right after Murphy’s election in November, now opposes any tax increases following the limits on property-tax and state and local tax deductions in the new federal tax law.

The battle over the budget also reflects differences in political style.

Murphy, who won office with a 14-point margin, was a longtime high-ranking executive at Goldman Sachs before serving as finance chair for the Democratic National Committee and as ambassador to Germany.

With a career heavy on executive experience, Murphy’s budget negotiating style has come off at times as top-down to legislators who have complained that he has done little to forge the kinds of relationships that grease the wheels in political backrooms.

“We’ve been open to compromise, we’ve been open to alternative ideas, but we will not be bullied into doing the wrong thing simply because the governor says to do it,” Sweeney said during a news conference Monday.

Murphy, in his news conference Tuesday, said his door was always open.

But his Wall Street background also instills a distaste for having to come up with budget solutions on a year-to-year basis.

“This is the mindset that I am trying to break here in Trenton,” Murphy said. " We cannot enter every June in crisis trying to figure out how we’re going to keep the lights on, let alone invest in the big things New Jersey needs for its future.”

From Sweeney’s point of view, trying to break a mindset in Trenton still requires abiding with some Trenton norms.

“I’ve never been involved in a budget, and this is my ninth budget, where I’ve been handed a budget by the governor and been told it’s a good budget, it’s my budget, and pass my budget, without any compromise,” Sweeney said.

Further hampering negotiations is the damaged relationship between Murphy and Sweeney. The Senate president was hurt when Murphy chose not to intervene during an aggressive campaign against his re-election last year by the New Jersey Education Association, one of the state’s most powerful unions.

Murphy, who was endorsed by the union, opted not to take sides while the union backed Sweeney’s Republican opponent.

The two men are also at relative opposite ends of the Democratic political spectrum — Murphy has called himself “progressive, proudly so,” while Sweeney refers to himself as a “moderate.”

On Tuesday, Murphy said his decisive victory margin last year gave him proper authority to steer the budget.

“We won by over two touchdowns, big Democratic majorities,” he said. “Everybody knew exactly the basis upon which we got elected.”