We have a spending plan.

Governor Mikie Sherrill laid out her first budget proposal this week.

A record $60.7 billion.

Now begins the process of finalizing it.

Hi everyone.

I'm Joanna Gagis.

This is Reporters Roundtable.

We've got a panel of journalists with us to help break down all that's happened in the last week of New Jersey news.

Let's welcome our panelists.

First up, Lilo Stainton, senior reporter for New Jersey Monitor.

Charlie Stile, political columnist with the Record and USA Today Network.

And Brent Johnson, politics reporter for NJ Advanced Media.

So it's in the books.

Governor Mikie Sherrill delivered her first budget address before a joint session of the legislature.

And Brent, we look at $2.6 billion in budget solutions.

She says she cut $2 billion in spending and yet the budget increased by $2 billion.

How do you square all those numbers?

Yeah, it's a it's a tough paradox.

But the idea is that there was a three billion dollar structural deficit in the budget coming in.

She cut that by half by making a number of spending cuts but also keeping a number of programs intact.

So the but the deficits now about one point six billion.

So there's still a gap.

But she's saying the idea is that she's trying to get the fiscal house in order and that she's making steps to change this.

Charlie like Brent just said she presented this as the most fiscally responsible budget that the state has seen in years.

But there is still that structural deficit.

She did reduce it.

But we're still seeing one point six billion more in expenditures than in revenues.

Yes.

Yes, I think it's an argument they're going to make is that we reduce the rate of spending dramatically.

But it still doesn't really quell the criticism that you're increasing spending.

And if you listen to the hard line, more conservative Republicans say, well, if you really, I heard this from actually a couple off the record Democrats, if you really wanted to cut spending, just come out with a spending a budget that was at minimum the same level as the current budget.

But I think what she did, though, is I think she kind of navigated this a pragmatic budget in a lot of ways.

I feel like she she cut some down the projected deficit, which is a bit of a phantom paper phantom anyway, but she cut it down.

And she was able to make some cuts and some decisions that are not going to be greeted warmly by everybody.

But it's not not enough to get everybody furious.

Yeah, there's good.

We're going to get into the politics of it and who's mad about it and who's not.

We've heard from the GOP and their response.

the leadership in the Senate and Assembly on the Democratic side.

But we'll talk about that in a minute.

Lilo, one of the reasons why the governor says she has to keep spending where it is or keep some of these increases is because of the loss of federal funding coming to the state in particular with Medicaid.

What do we stand to lose just this year alone in terms of Medicaid reimbursements?

Right.

And this is interesting.

I mean, Medicaid is clearly there.

There are these giant changes that are coming down the pike for Medicaid.

The truth is, most of those don't impact the budget on year one.

Right.

So I know that she mentioned, I mean, over time, we will see massive cuts like 3.3 billion in lost income annually or revenue to the state each year.

But that's down the road.

That's like a decade down the road.

What happens first is changes to the program that are going to create these work requirements starting next January that a lot of people will have to meet, about half a million people or more.

And that's likely to force some 300 plus thousand people off the rolls, according to what experts analyze.

I mean, the red tape is so bad that they will opt not to take that care.

So what she talked, I saw that when you had the interview with the governor, she talked about a billion dollars in lost revenue.

I mean, a lot of that is snap money.

That's hundreds of millions of dollars.

There's child welfare money.

There's other health care money.

So there's a tremendous amount that the state gets from the federal government that, you know, that is just drying up or dwindling down now under the Trump administration.

And that really leaves her in a position of saying, look, you know, how much of this does the state want to take on and fund on its own?

And, you know, to the question of the budget going up is, you know, we all know our own health care costs are going up health care, the cost of everything is going up each year.

So if the state, you know, flat funds things, they are, in a sense, cutting what the services that they currently deliver, cutting back on what they deliver now in the future.

So, you know, like she said, these are tough choices.

But the lack of aid from Washington does not help at all.

On top of these, you know, major buckets that she needs to fulfill, first is pensions, right, Charlie?

Then we've got the school funding formula.

She is fully funding all of those in her first year.

She calls that monumental given the fact that she's the first governor, I believe, since Christie Whitman in the early 90s or mid 90s to fully fund those.

What does that mean, though, in terms of what the state has to put out financially?

Well, I know school funding represents anywhere.

I don't have the exact number, but it's been between 16, $18 billion.

I think it's about 12.4 billion.

But this year, okay.

But I've said, all right, it depends on what you're throwing into that bucket.

But it's a huge piece of the state budget.

So, and yeah, I think this goes back to the original point about whether the budget actually grew.

And the reality is that every one of those school districts are facing rising costs, rising health care costs, fuel costs.

And that upward pressure is definitely being felt in this budget.

So yes, would it be optimum for the new governor to come in here and cut the budget or keep it flat?

That would be great politics.

But the reality is that money out in the districts.

The pressure from out in the districts is simply can't be ignored without driving up property taxes.

It certainly is.

And we got those school funding numbers this week.

And so you can imagine school districts right now are digesting that and figuring out what it means for them.

And there are definitely a number of districts who are still on the losing end year over year in terms of what they get back from the state.

And so we will be hearing for them.

That's for sure.

Brent stay and J. You called it.

You said likely to be cut.

She didn't remove it entirely.

But what is she doing with stay and J. And what do you think the impact is going to be there.

Let's first start with what is she cutting.

Yes.

So she is shrinking the program.

What she says is to focus it on the middle class.

She is dropping the eligibility from five hundred thousand dollars a household to two hundred fifty thousand.

So she says she is she's knocking off some of the higher end earners and she's capping the maximum payout from six thousand five hundred to four thousand six six thousand five hundred to four thousand.

So she's giving it a haircut.

And it's something you've heard critics say it's it's been too it's too expensive and that it benefits wealthy residents more.

So she's she's addressing that.

That was the big thing coming in.

The question was was she going to take this swing because this has been talked about for a while.

And obviously that puts her on a possible collision course with state assembly speaker Craig Coughlin.

He's the guy who launched this program and he and he kind of had a statement where he didn't mention stay in Jay directly after her speech.

But he did say he would fight for property taxes and looks forward to property tax relief and looks forward to working with her on this.

So it's a big question how big of a fight this is going to be but it's definitely it's definitely a shot across the bow.

We have talked to Republicans leading up to the budget who initially have been very critical of Murphy launching stay and J. But once it was in place I'm not sure anyone wanted to be the legislator who kind of pulled it back.

They said look can the state afford it.

Not necessarily but you know do we need property tax relief.

Yes let's do it on the front end not the back end.

But folks in the business community are supportive of this haircut as you call it Brent.

But I have to ask you, Charlie, when she's now trying to work with the legislature to enact this budget, do you think there's some tension now that exists behind the scenes, especially with Assembly Speaker Craig Coughlin and Senate President Scutari, who didn't look too happy during her speech at various points?

They looked like they were squirming.

I think there's going to be a lot of backroom tension over this very issue and there'll be a lot of pressure to dip into a surplus even further to accommodate this program.

But the pushback you're going to get from her is like, well, her administration is 90% of everybody that got the check is going to get the check at a slightly less amount.

And frankly, by rolling back the income eligibility from half a million to a quarter million, that really is not going to affect, that's primarily going to affect mostly Republican homeowners.

If you want to get into the raw politics of it, I mean, yes, there are Democratic, there's I'm sure there's a fair number of Democratic households that got it.

But it's not really the Democratic base.

And so I think they're going to have some political cover on that.

And secondly, look, this issue, this, these checks just started going out.

It's not like it's they've become incorporated as a mainstay of New Jersey life.

A lot of people are going into their mailbox lately and say, oh, when I get this $500 check from Anchor or from Senior Freeze or from Stay & J. I mean, they're all kind of related into this new program kind of under the rubric of Stay & J. So I guess my point is, it's not this institutional thing that people have come to expect year in, year out.

So if they were going to do this, this is the year to do it.

And half a billion dollars is significant in the context of this budget.

Yeah, yeah, for sure.

Lilo, I spoke to the governor, as you mentioned earlier this week.

She says she's not taking aim at the business community, that she she's enacted many policies in this budget that will or she's proposed many policies, I should say, that will support especially smaller business, medium sized business.

But one thing she's calling for is for big business to cover the health insurance costs of their employees.

It's getting mixed reaction actually from folks who are find themselves on the same side of concern that we don't usually see aligned.

What are you hearing?

It sure is getting mixed reaction.

It's really interesting because I spoke to Peter Chen at New Jersey Policy Perspective this morning and he was saying this is a proposal that is, he said, narratively attractive.

I mean, it's very hard to not want to say make these people pay, these large businesses pay their fair share, right?

Sounds really good.

Truth of the matter is there are these about, there's a 2024 report from the state that shows about 748 businesses have at least, or employers have at least 50 people on Medicaid, and which means the state taxpayers and federal taxpayers, which is all of us are paying for those, paying for that care instead of health insurance.

But it turns out that you know, businesses say, I mean, I talked to, but I spoke to people at both Walmart and Amazon, which are some of the bigger sort of offenders, if you use that in air quotes.

And others are Wawa and Target, and there's some staffing companies and then of course, Starbucks, and you go down the list.

But they say, you know, we are really sort of, we are a critical sort of entry level opportunity job place for people who are coming in if they have Medicaid, you know, they may, if we have to penalize, if we're paying a fee, which is what she's proposing a fee of up to $725 per worker on Medicaid, businesses are saying then, you know, people might be less likely to want to hire these people.

It means these people may have to choose to go off a plan Medicaid that they've been on for a long time, it gives them instability for their health care.

The interesting thing is Peter Chen, you know, a traditionally very left wing sort of think tank, agrees with a lot of those points and said, you know, while he likes the idea of making the corporations do contribute somehow, you don't want to be discouraging people from getting this insurance plan because they think, well, if I enroll in Medicaid, then if I have to find a job, you know, if I get a job at one of these companies, I'm going to have to drop it because they'll they or maybe they'll be paid less than than employers, employees who don't have Medicaid.

So in other words, Lilo, it sounds like there's a lot of uncertainty if employees end up being covered by private insurance, they have to come off Medicaid, maybe they can't get back on to right?

Yeah, if they're worried about the turn.

I mean, they're just if there's all these unintended consequences.

And I think it's worth noting that this has been considered a lot, but I don't think any I have not found another state that has done this.

And there may be something in that maybe it is not as easy to do as as it sounds.

Certainly sounds attractive.

The governor said we could raise 145 million through this on the first year alone.

You know, you could argue the fees aren't that huge, $725 a year per person.

But it adds up if you have, you know, some of these, I think Amazon was the largest, I believe, and it had 15,000 beneficiaries, about 5000 workers and about 10,000, you know, family members insured through Medicaid.

That's a lot of people.

And they, and you know, the cost is enormous.

I mean, I did a story, it's, it's tens of thousands of dollars, you know, a month in some cases.

So it's a lot of money.

I mean, tens of millions a month.

It's gonna be interesting to see how the legislature responds to this and what they hear in terms of pushback because it is folks on the left and the right in the community saying, not sure that this works.

Brent, she does say she wants to support small business.

She put a significant amount of money and minority owned businesses.

That's coming at a time when we've seen DEI rollbacks federally across the country.

But she wants to end this alternative business calculation.

She says it was a giveaway.

I think it's about two point five billion dollars that she says.

If I have those numbers correct.

Can you can you add some color there in terms of what this means for the business community.

Yeah I mean these are things that are still going to get worked out in the coming weeks and months over the budget.

But I'm sure this is another thing that is we still don't know exactly how the business community is going to react.

We'll probably see more of that when they hold public hearings on the budget.

That's when you start to see advocates and people who are against things come out.

But you know, she has tried to draw a line something that her party does between big business and smaller businesses She wants to help smaller businesses.

And you know I even heard some advocates including policy perspective say they'd like to see her do more to tax wealthier people and maybe businesses.

So a lot can change over the next few months.

That's one thing to watch out for.

This is really going to be an ongoing discussion.

And as we always see with this budget process but especially this year because Cheryl seemed to be taking aim a little bit at her own party and saying that things need to change with how the budget gets put together.

And I should clarify it's one hundred twenty million specifically for that.

If she changed that tax policy overall she says there were two point five billion in in giveaways that we saw that she she shifted.

Go ahead Charlie.

I just want to add to what Brent said.

I think one of the things that's interesting about Cheryl kind of outreach to the business community early on this kind of off the radar courtship of business they they brought in if you notice at the beginning of her administration some of her first executive orders were pro business cut down on red tape permitting and you talk to the New Jersey Business and Industry Association they speak very highly of Sherrill.

They speak very encouragingly if not warmly about her about Sherrill and her attitude towards business they at which was a stark contrast in their view to Phil Murphy.

So I think she's been very pragmatic in trying to defang the business community with these sorts of okay we're going to hit you with a tax increase and closing of these loopholes but on the same token we're going to keep the door open to you.

You have a seat at the table.

We're going to hear your concerns and maybe give you an opportunity to maybe shape them which I found to be kind of interesting.

There's a couple other areas that she seems to be taking that approach.

You raise a really good point there Charlie and don't they say a great negotiator leaves the room where nobody's truly happy and nobody's truly mad right?

I think we're seeing a lot of that from Democrats and Republicans, community advocates, business leaders.

Everyone's got a little bit of a complaint and everyone's also pleased by what they see.

To your point, the New Jersey Innovation Authority is something that she wants to increase funding for by $13 million and she wants to create this permitting dashboard and a New Jersey report card so businesses can see where they are in the permitting process.

It's something we heard a lot of on the campaign trail that seemed a little wonky, but right now seems to, as you said, be something that the business community is welcoming and they feel that their concerns are heard.

Let's pick back up on the politics of it and how all this plays out.

We saw, I saw some of the Senate leadership, Sarlo, Ruiz, and Senate President Nick Scatari put out a statement right after the speech, kind of saying, "Hey, we've fully funded the pension, we've fully funded schools under the Murphy administration."

A little defensive in tone, but saying, "We want to continue working with the Murphy administration."

Brent, do you think that she's going to be able to get through some of the legislation that she'd like to see proposed or do you think that Charlie touched on a little bit behind the scenes there's going to be some real kind of knocking as to who's in charge here.

Yeah, I've already heard some talk that not every lawmaker was happy about her comments about how they need to control add on spending stop that and and that we they haven't run the budget well in recent years and you know she didn't name anyone by name and she didn't call any party out by name but you know obviously Democrats have controlled the legislature for 20 years in the governor's office for eight years so you could see that as kind of directed at her party and you know she she she said things have to change and the question is how much do these entrenched lawmakers want to change things and they think they've been doing things right along this time and they have constituents to think about and I don't expect it to be an all-out war but I do think there is going to be some tension in the coming months this is really when the budget gets gets done isn't in the especially the final month in in June before we get to the July 1st deadline so you know there was also tension between Murphy and his fellow Democrats when he came in after eight years of Christie they almost went to a state government shutdown in the summer of twenty twenty eighteen and I know because I was there sitting out in that parking lot waiting for them to come out and talk to the press so yeah I don't I don't think this is going to be an easy relationship between them but I don't know how bad it's going to get I guess we'll find out in time.

Yeah quickly on nine eight eight is a hotline that the governor has said she's going to continue funding Lilo anything you can add just quickly on that?

Right they're gonna flat fund it there's no word yet whether that means they are counting on revenue from this bill that would increase by 40 cents fees on telephones so you know that still has to work its way through the legislature it's not clear but these are programs that are sort of being there's a hotline in place but the rest of the rest of the infrastructure is just starting to be created and it was set to run out of money and the end of the fiscal year so at least we know there is state money there to continue these programs and you know I think an important statistic just to keep in mind I saw this you know four and ten kids have talked about in New Jersey have talked about being sad or hopeless for more than two weeks so when we see Governor Sherrill's focus on this I think you know me she may be on to something that will touch a lot of people in a really real way it yeah I mean it's just seeing how we address it 988 is the crisis and suicide prevention hotline she's also going to put millions behind a youth mental health and mental wellness initiative as well as veterans homelessness an area where there is a whole lot of bipartisan support we saw standing ovations there but that's all the time we have Lilo Brent Charlie I want to thank you all for your insight today and you can follow me on Instagram @joannagagisNJ and go ahead and scan that QR code on your screen to see more episodes of Roundtable.

For all the crew here at Gateway Center in downtown Newark I'm Joanna Gagis.

Thanks for being with us and have a great weekend.

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