Credit: (AP Photo/Seth Wenig)

As federal lawmakers consider extending tax breaks for high earners and cutting back social safety-net programs, an influential think tank in New Jersey is urging state policymakers to begin using the state’s own resources more equitably.

To do so, a report issued Tuesday by New Jersey Policy Perspective recommends Gov. Phil Murphy and lawmakers make several changes to a newly established, state-funded tax-relief program called Stay NJ.

The state law that created Stay NJ now requires the state to spend $600 million over the course of the fiscal year that begins July 1 to fund tax breaks exclusively for a group of senior homeowners earning up to $500,000 annually.

But the cost of the program is estimated to double to more than $1 billion, after July 2026, with no source of funding currently earmarked to cover that increase.

In a report dubbed “Course Correction,” the progressive, Trenton-based think tank calls for spending on Stay NJ to be reduced by lowering the program’s annual income threshold to $150,000. The report also calls for reducing the size of the maximum Stay NJ benefit, from $6,500 to $5,000.

Revise Anchor to help renters?

At the same time, the report urges state policymakers to consider doubling the size of the popular Anchor tax-relief benefits for senior renters who earn up to $150,000 a year. This change would increase the size of Anchor’s senior renter benefit, from $700 to $1,400.

“Senior renters face serious housing insecurity challenges, putting them at higher risk of housing insecurity than senior homeowners,” according to the report authored by NJPP senior policy analyst Peter Chen.

“More than 1 in 4 seniors in New Jersey rent but would receive no new benefit from Stay NJ, including over half of Hispanic/Latinx and Black seniors,” the report said.

The report’s release this week comes at a key time in the state’s annual budget-approval process.

Murphy and fellow Democrats who control both houses of the Legislature must enact a new annual budget by the July 1 start of the next fiscal year or state government must shut down under language in New Jersey’s Constitution.

Stay NJ’s big price tag

For his part, Murphy has proposed a $58.3 billion budget plan that calls for increased spending in several areas, including the $600 million earmarked for the first round of Stay NJ benefits, due to be distributed in early 2026.

Under the Constitution, lawmakers have the power to draft and send the governor the annual spending bill that will become the state’s next fiscal-year budget.

‘The point of our analysis is to ask the question of whether we’re sending that money to the right people.’ — Peter Chen, New Jersey Policy Perspective 

That part of the process has still yet to occur, and it’s unclear right now when legislative leaders plan to introduce an annual spending bill or move it through both houses of the Legislature in the run-up to July 1.

Meanwhile, the fiscal decisions state policymakers are making this month coincide with major spending changes up for consideration at the federal level in Washington, D.C. that could have significant consequences at the state level.

These include cuts to Medicaid and other social safety-net programs that could shift billions of dollars in new costs to the states.

Looking for a course correction

In an interview with NJ Spotlight News, Chen cited the pending federal policy changes, which include extending and, in some cases, expanding tax breaks that largely benefit the wealthy, as he made the case for state government to change course on its own planned spending on homeowner tax-relief subsidies.

“Sometimes these are described as a tax cut, but they are actually a spending program,” Chen said, referring to Stay NJ. “A tax expenditure is still a spending program, and it’s still prioritizing sending the government’s money to a specific subset of people.”

‘By refocusing the program on those most likely to experience housing insecurity and adjusting benefit levels for wealthier households, New Jersey can deliver targeted relief without exceeding its budget capacity.’ — New Jersey Policy Perspective ‘Course Correction’ report, referring to Anchor program

“The point of our analysis is to ask the question of whether we’re sending that money to the right people,” he said.

The NJPP report also notes Murphy and lawmakers are planning to fund the Stay NJ program when state government itself has been spending more on an annual basis than it is taking in annually from tax collections.

NJ’s budget gap

This structural imbalance measures more than $1 billion in Murphy’s proposed budget. To close that gap, the state has drawn down from the same budget surplus account that could ultimately serve as New Jersey’s primary source of funding to offset the proposed federal cuts to Medicaid and other safety-net programs.

These cuts have already been approved by the Republican-controlled U.S. House of Representatives and are now pending in the U.S. Senate, which is also controlled by the GOP.

By contrast, NJPP’s proposed changes to the Stay NJ program would result in net savings for the state, even after accounting for the proposed increase in spending on Anchor senior renter benefits, which have been held flat by Murphy and lawmakers for the last several years in the face of rising inflation.

“By refocusing the program on those most likely to experience housing insecurity and adjusting benefit levels for wealthier households, New Jersey can deliver targeted relief without exceeding its budget capacity,” the report said.

“The state can also correct for the exclusion of senior renters from Stay NJ, who are much more likely to suffer from housing insecurity and high housing cost burdens than homeowners,” the report goes on to say.