Well, we're one step closer to having a final budget in place.

Lawmakers worked late into the night yesterday to vote a budget bill through the state Senate and Assembly budget committees.

After having only a few hours to review it.

And oh boy, is there a lot to break down.

It's another record level spending package $56.6 billion in state funds, another 27 billion in federal funding.

So what made it into this spending plan?

Well, for starters, Governor Murphy's proposed corporate transit fee.

That's a 2.5% tax increase on corporations that earned more than 10 million in profits a year.

This budget would be the first ever to fully fund the school funding formula, and the state pension system.

It also restores funding for community colleges.

That was a proposed cut when the budget was first outlined.

Other key priorities we see funds for, too property tax relief programs anchor and stay NJ.

But in a nearly 400 page document, there's so much more to digest.

And that's what budget and finance writer John Reitmeyer has been trying to do since it was released yesterday.

He's taking a moment to break it all down for us.

John Wright Meyer not a whole lot going on, I know you've been working all day trying to figure out.

And yesterday to trying to kind of figure out the details of this budget.

We know the governor's corporate transit fee made it in, but it's not that clear cut.

Why is this a nuanced fee that was added to the budget?

Yeah, and that's a really good way to frame it, because in the first year, this tax is going to generate revenue for the general fund, at least according to the new, legislation.

The copies that we got yesterday.

And so it's being billed as a transit fee, because when we go out into future fiscal years, the intention is to dedicate this revenue to NJ transit.

And anyone who's been on the trains lately knows that that agency needs it.

But we have to be careful because this money right away won't go to NJ transit, especially with NJ transit riders facing fare hikes starting Monday.

And so this is more of a long term funding source, which is something transportation advocates have been pushing for for quite a while.

But it does not head off the fare hikes that NJ transit riders will see early next week.

And then does it create almost like a one shot gimmick here for this year's budget that they'll have to deal with down the road?

Well that's right also.

So if we do end up seeing that money go to NJ transit, which again, it needs right now that money's balancing the new state budget that goes into effect on Monday.

And so then does the state replace that money with some other source or will, they find a billion in spending cuts?

So that's the challenge, of budget making right there.

So this is not the sexiest topic, but we have to bring it up.

This budget spends down our our reserves by $2 billion.

Is that a wise thing to do at a time when we see spending and inflation so high?

Yeah, it's certainly not, best practices when you would talk to, say, fiscal experts who study state budget policy.

It's almost like using your savings account to pay your grocery bills instead of using your paycheck to pay your grocery bills.

eventually you're going to spend down your savings, and then you're going to have a hole in your budget if you're using your paycheck for other things than groceries.

And so the state has built up a pretty big surplus, in recent years.

The economy's been fairly strong and inflation has actually driven up sales tax receipts.

But as things are starting to tighten up, this instead of adjusting annual spending to where revenues are going to be, they're instead going well above that and spending down reserves to keep spending at the higher level.

And so eventually those reserves are going to run out and there will be, reconciliation, down the road for sure.

We've seen criticism from Republican lawmakers who say, you know, right now you're putting us in jeopardy at a at a record high spending level, 56.6, drawing down against 8 billion is not a whole lot of money to work with, comparatively.

Right.

but when we look at just to move on to this other point, we look at the state right now for the first time, fully funding the school funding formula and the pension system, is that kind of the balance for why they need to draw down against the reserve?

I mean, that's the really important point to bring up.

And and again, the challenge of budget making.

We heard, from the Senate Budget Committee Chairman, Paul Sarlo yesterday that it's not a perfect budget.

And so you might want to have a bigger reserve for sure, especially as you push spending up to a record high.

The state uses that reserve to offset revenue losses that occur when we enter into an economic downturn, like we saw during the first year of the Covid 19 pandemic.

But at what expense do you build up those reserves?

If it's costing you, say your your full pension contribution, which the state really has to make, or you're short funding your school funding law, which results in cuts in sometimes cuts to districts that need that money the most.

And so really, that's sort of the trade off that lawmakers always have to to balance every year is which of these priorities do we make top on the list?

And maybe which ones can push down a little lower?

We don't have a lot of time left, but one of the things we always scour for are these add ons, right?

These Christmas tree items that get added on as part of last minute deals.

What do we see in this budget?

Anything significant?

Well, in all, the lawmakers added about 600 million in new spending to the final draft of Murphy's budget.

There are, you know, the typical ballpark add ons, a million here or a couple hundred thousand there for pet projects.

But we also see add ons for a soup kitchen or for different programs, in at risk communities.

And so there's a balance this year, between what's been added, some of what you would generally see, and then, you know, some items that probably have a lot of merit in the communities in which this funding will be going.

Community colleges, we know, are one of those.

They actually saw their $20 million funding, restored.

John Wright Meyer, thank you for adding so much color to what can be a sometimes opaque process.

John Reitmeyer, thank you.

You're welcome.