By this time next year, it is likely that Gov. Phil Murphy’s proposed 2023-24 budget will have blown past $50 billion — more a psychological barrier than a fiscal one — bringing the state one step closer to a day of reckoning when funds from massive borrowing, federal aid and unanticipated tax revenue increases have been spent and the programs they supported are no longer sustainable.

Even as public hearings have begun on the $48.9 billion spending plan for the approaching fiscal year, the Assembly’s budget committee has been besieged with pleas and requests for increases in funding from supporters and beneficiaries of a wide array of programs, all of whom warn that hardships and economic consequences will befall them if additional aid is not forthcoming.

The parade of supplicants is part of the customary annual pilgrimage to the State House to persuade legislators to look and act favorably on their requests, each assuring them that the programs they administer have enjoyed success, helped individuals in need, address new issues and deserve additional funding.

While legislators will express sympathy and concern, more requests will be declined than granted and the spending plan as submitted by the governor will be delivered to his desk with minor changes and adjustments.

The larger question, however, involves the creation of proposed new or expanded spending in the budget currently under review and whether they can be sustained — or should be — when the borrowed money is exhausted and the prospect of new and greater federal aid vanishes. 

Billions and billions…

Buoyed by $6.2 billion from the American Rescue Plan package to help ease the economic impact of the COVID-19 pandemic, $4.3 billion from emergency borrowing and $4.6 billion more than initial tax revenue projections for the current fiscal year, the Murphy administration was flush with cash and free to search for ways to spend it.

Nothing, it’s been said and understood, solves political problems more than an overflowing treasury.

In his proposed budget, Murphy went directly to the heart of that belief,  calling for scrapping the 45-year-old Homestead Rebate program and replacing it with a rebate phased in over three years, starting at $680 and increasing each year, to $1,105 by 2025, at a cost of $1.5 billion.

The rebate would appear as a credit on property-tax bills for approximately 1.15 million homeowners with incomes of up to $250,000 while renters with incomes of up to $100,000 would receive a rebate of up to $250.

Having adopted” affordability” as the official administration buzzword, the program is designated the “Affordable New Jersey Communities for Homeowners and Renters program — ANCHOR for short.

The original Homestead Rebate program, which is credited with the 1977 reelection victory of Gov. Brendan Byrne, has been whittled down steadily by reducing eligibility and amount or by skipping some years entirely.

Budget shortfalls

That history — diverting rebate funds to cover other budget items and avoid program cuts or tax increases — contains the perilous potential for Murphy as well that could result in hoisting the ANCHOR.

At $1.5 billion when fully phased in, it is simply too big a target for an administration or Legislature suddenly faced with a budget shortfall and in desperate need of cash.

An economic slowdown or a decline in tax revenues at some point would place the state in a precarious fiscal position. Another multi-trillion-dollar federal assistance package is not in the cards and attention would surely turn to the rebate program as a bailout.

The history and experience have been repeated through successive legislatures and there is no reason to believe it will not occur again if conditions deteriorate.

Big-ticket items such as aid to local school districts ($11.6 billion) and contribution to the public employee pension system ($6.8 billion) have been targeted in the past and could be again to ease a budget crunch.

Murphy has also proposed either increases or new programs in higher education, health care, affordable housing and community colleges.

All in all, his proposed budget is a 5% increase in spending, year over year.

Republican criticism

Republican critics have raised concerns over sustainability and whether the promises made this year will be fulfilled in three years or beyond.

Once new initiatives are written into budget law and develop and serve a constituency, repealing them or reducing their funding can be extraordinarily difficult and politically risky.

President Reagan once observed wryly that the closest thing to eternal life is a government program, a recognition that once embedded in law, prying them loose involves going to war with legislators and private-interest pressure groups.

Murphy has submitted to the Legislature a “let the good times roll” spending plan and, like others before his, the roll eventually slows, and hard decisions await.

The money wave has built momentum and Murphy is riding its crest. By the time it recedes, he’ll be approaching the end of his second term.

After Murphy

In 2024 and ’25, Murphy will be considering who to commission to create his official portrait, where to donate his official papers, musing over whether to join a Democratic administration in Washington, D.C., if there is one, or assessing re-entering the high-powered investment world he once occupied.

Odds are he’ll leave office on a fairly high note, his record of government expansion still relatively strong while his successor and the Legislature will be left to deal with the structural budget deficit the expansion has produced.

When conservative thinker, author, polemicist and intellectual force William F. Buckley founded National Review, he described its mission as ”standing athwart history and yelling “Stop.”

Will there, in the next few years, emerge a courageous legislator to stand athwart the state budget and issue the same command?