SUMMARY BUDGET VOTE AND PROPOSED TAX INCREASES

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1 REVIEW OF GOVERNOR S LINE-ITEM VETO OF FY2016 APPROPRIATIONS ACT SENATE BILL NO. 2016/ASSEMBLY BILL NO JUNE 26, 2015 SUMMARY It appears that the partial restoration of direct operating aid to six of the state colleges and universities remains intact in the FY2016 budget, withstanding the governor s line-item veto. These increases total $2,511,000. The facilities-related appropriations for and Montclair State, however, were line-item vetoed, as explained in more detail below. BUDGET VOTE AND PROPOSED TAX INCREASES On June 25, the legislature passed the FY2016 appropriations act (S-2016/A-4600) by votes of in the Senate and in the Assembly. The appropriations act totaled $ billion, more than $1.5 billion higher than the governor s proposed $33.8 billion budget. The increased spending included over $ million for higher education. Most of the additional revenue under the legislature s budget would have been generated by two tax increases under legislation also passed on June 25. Senate Bill No. 2918/Assembly Bill No would have increased the income tax on incomes of $1 million or more from 8.97% to 10.75% for four years, raising an estimated $688 million in FY2016. Senate Bill No. 3201/Assembly Bill No would have imposed a one-year 15% surcharge on the Corporate Business Tax, raising an estimated $435 million. GUBERNATORIAL ACTION ON TAX INCREASES On June 26, the governor vetoed the Corporation Business Tax surcharge and conditionally vetoed the income-tax bill by recommending an expansion of the Earned Income Tax Credit (EITC) for low-income workers. The income-tax legislation would have increased the EITC from 20 percent to 25 percent, and the governor has recommended an increase of 30 percent. LINE-ITEM VETOES INTRODUCTION In his line-item-veto message, the governor wrote that the cornerstone of the legislature s FY2016 budget was a punitive tax policy, and that the foundation of the appropriations act was unsound. As a result, the governor vetoed the tax increases, and he certified revenues totaling $ billion, more than $881,546,000 less than the legislature had passed. HIGHER EDUCATION INTACT The following line items that were increased by the legislature for senior public colleges and universities remain intact after the governor s line-item veto: Institution Line Item Governor s Proposal s Act Increase Over Governor s Proposal

2 The College of New Jersey New Jersey City Ramapo College Stockton Thomas Edison State College William Paterson Center for Research and Education in Advanced Transportation Engineering State-funded positions $26,888,000 $27,177,000 $289,000 $23,598,000 $24,154,000 $556,000 $14,638,000 $14,953,000 $315,000 $17,649,000 $18,391,000 $742,000 $3,044,000 $3,292,000 $248,000 $29,996,000 $30,357,000 $361,000 N/A $1,200,000 $1,200,000 (reflected in Total Grantsin- ) 1,532 1, positions I will distribute an update on Monday with a comprehensive comparison of the FY2015 and FY2016 appropriations for the senior public institutions of higher education. HIGHER EDUCATION DELETED The governor line-item vetoed the following items from the legislature s FY2016 appropriations act: Institution Line-Item Amount/Language Notes Joint Osteopathic Decreased funding: Program with NJIT $10,000,000 Deleted language: The amount hereinabove appropriated for the Joint Osteopathic Program with New Jersey Institute of This reduction of $10 million resulted in a corresponding reduction in s Institutional Support and Total Grants-in- The governor s line-item veto stating: The Governor s original 2

3 Institution Line-Item Amount/Language Notes Technology is to be used for the establishment of a physical facility within which to operate the program and shall be conditioned upon: a determination by the State Treasurer that an appropriate arrangement, including a facilities plan, for the Joint Program has been developed and approved by each of the parties. budget recommendation included significant funding to support the operations of institutions of higher education, including support for the fringe benefits of employees. The State has also recently made available support for capital projects at institutions of higher education through a voter-approved bond referendum. Cooper Medical School of Montclair State Seton Hall State-funded positions School of Communication and Media Construction and Renovation Development of New Allopathic Medical School - Seton Hall and the fringe benefits for not more than 205 positions at Cooper Medical School of are funded by the State. The phrase not more than was deleted. The inartful deletion of of between Cooper Medical School and reflects the governor s intent to allocate 105 positions to the medical school and 100 positions to. $10,0000,000 This reduction of $10 million resulted in a corresponding reduction in Montclair State s Institutional Support and Total Grants-in- The governor s line-item veto stating: The Governor s original budget recommendation included significant funding to support the operations of institutions of higher education, including support for the fringe benefits of employees. The State has also recently made available support for capital projects at institutions of higher education through a voter-approved bond referendum. $20,000,000 The governor s line-item veto stating: The State has recently made available support for capital projects at institutions of higher 3

4 Institution Line-Item Amount/Language Notes Hackensack Health Network education through a voterapproved bond referendum. OTHER LEGISLATIVE INCREASES FOR HIGHER EDUCATION LEFT INTACT to Independent Colleges to the independent colleges and universities increased by $500,000, from $1 million to $1.5 million. Educational Opportunity Fund The Education Opportunity Fund (EOF) received two increases, for a total increase of $2,565,000. Program Governor s Proposal s Act Difference Opportunity Program Grants $26,019,000 $27,576,000 $1,557,000 Supplementary Education Program Grants (campus outreach and support services, such as tutoring, counseling, supplemental instruction, leadership development) $12,803,000 $13,811,000 $1,008,000 Nonpublic Security The FY2016 budget provide $2 million to the Secretary of Higher Education to be allocated to the institution of higher education determined by the Secretary to be most in need of security enhancements in order to protect the safety of students and faculty. OTHER HIGHER-EDUCATION RELATED ITEMS The Department of Education s budget includes $435,000 for Advanced Placement exam fee waivers for low-income students. The Department of Labor and Workforce Development received $5 million that might be available to colleges and universities. The funding is included in this language added by the legislature in the appropriations act: In addition to the amount hereinabove appropriated for Vocational Rehabilitation Services, there is appropriated an additional $5,000,000 from the Workforce Development Partnership Fund for Extended Employment (Center based jobs), Extended Employment Transportation, and Long- Term Follow Along Services. I will consult with the Department of Labor and Workforce development to learn more about this funding. STATE PENSION SYSTEMS The governor returned the State s total payment to the public-employee pension systems to $1.3 billion. The legislature had appropriated $3.1 billion for the pension payment to maintain the schedule within the 2012 pension reform law. The governor line-item vetoed $1.8 billion from the legislature s total. 4

5 The governor also line-item vetoed language that would have required quarterly payments into the State s defined benefit pension systems (the Teachers' Pension and Annuity Fund, the Judicial Retirement System, the Public Employees' Retirement System, the Consolidated Police and Firemen's Pension Fund, the Police and Firemen's Retirement System, and the State Police Retirement System): at least 25% by August 1, at least 50% by November 1, at least 75% by February 1, and 100% by May 1. NEXT STEPS The legislature can restore line-item-vetoed items by overriding the governor s action by a vote of at least two-thirds of the members of each House. Neither the Senate nor the Assembly has scheduled an override vote of the appropriations act during its session scheduled on June 29. We will keep you informed of any updates, as the legislature s agenda can change quickly. 5