Murphy retrospective, Part III: By the numbers — Taxes, budgets and surpluses

For the business community — one always thinking of the bottom line — there is no better way to judge Gov. Phil Murphy’s eight years in office than the size of the state budget.

Start with this: The budget jumped from approximately $34.7 billion in 2018 to $58.1 billion for fiscal year 2026. And despite this 67% increase, the latest budget still comes with a structural deficit of $1.46 billion.

Critics will say it’s a great example of reckless spending. Even more, business groups will cry the spending isn’t doing enough to spur economic growth.

Murphy, in an exit interview to detail his time in office, pushed back. With vigor.

Murphy said revenues in the state increased by $21 billion annually — only $3 billion of which came from increases in taxes, he said.

“Do the math,” he said — before offering his debate points.

“I love those critics, because they’re completely wrong,” he said. “The increase is right. But you’ve got to think about this: We’ve increased our revenues from the first budget to last budget by $21 billion. That’s growth. With all due respect, that’s revenue.”

Murphy also proudly pointed to the fact the state has made a full pension payment in each of its last five budgets — starting in fiscal year 2022. The payment of $7.2 billion for fiscal year 2026 is nearly 300% higher than the highest pension payment of his predecessor, Gov. Chris Christie, who made a $1.9 billion payment in his final budget.

The administration cites increasing spending on education and health care (especially for women and families) as well as leaving a surplus of $6.7 billion, which is exponentially higher than the just over $400 million surplus he inherited.

All of this led to a combined nine ratings upgrades from the big three ratings agencies (Moody’s, S&P and Fitch), which rates the state at A+ (or AA3 in the case of Moody’s). The state’s outlook is viewed as staple, but it remains 3-4 levels below the top rating, even after the upgrades.

Murphy said he’ll gladly call it a win.

“It’s the thing that I’m most proud of,” he said. “No. 1, it was not easy. No. 2, it is something that has to be worked at, to be maintained, both the current ratings and any aspiration to increase it.

“It’s not that complicated what the rating agencies look for, but they tend to act swiftly if they want to take you down and tend to act over a long journey to take you up.”

Any discussion of the budget, Murphy contends, must include recognition of the disastrous shape it was left to him by his predecessors — from both sides of the aisle he always points out.

Had the state been making its regular pension payments, the latest payment would have been less than $1 billion — meaning the state essentially paid a $6 billion penalty this year, a penalty it will continue to pay for decades.

“The malfeasance from both sides of the aisle for decades in this state, the fact that we’re digging out of this and we have been every minute of our eight years together, angers me beyond almost anything,” he said.

The biggest anger from the business communities comes in the form of taxes — especially the corporate business tax.

In 2018-21, Murphy applied a 2.5% surcharge, raising the top CBT rate from 9% to 11.5% for corporations with more than $1 million in net income.

In 2021–23, it was reduced to 1.5%, keeping the effective top rate at 10.5%.

And though the surcharge was allowed to expire in December 2023, with much gratitude from the business communities, Murphy introduced a nearly similar tax (the corporate transit fee) that adds a 2.5% surtax on corporations with more than $10 million in New Jersey-allocated taxable net income to support NJ Transit.

This surcharge will run through 2028 — though it certainly could be extended.

“I wasn’t happy to have to do that,” Murphy said. “We did it. We ultimately landed with I think is a reasonable runway to help NJ Transit get its fiscal house in order.”

Numbers. It’s all about numbers.

Some say Murphy is leaving his successor, Gov. Mikie Sherrill, in a perilous predicament with her first budget — one that seemingly is filled with too many obstacles to overcome.

It comes with the territory, Murphy said.

“People have said that almost every year we’ve been every year,” he said.

Murphy points to the surplus he’s leaving behind.

“The surplus we inherited was $400 million and something,” he said. “The surplus in the June 30 budget was $6.7 billion. So, we’ve not only increased revenue, largely not through taxes, but we’ve retained over $6 billion of it.

“I wonder if the critics got through math. Those numbers speak for themselves.”