TRENTON, N.J. (CBS/AP) -- New Jersey Gov. Phil Murphy is demanding more new taxes and he wants a certain group of residents to pay a lot more. Murphy unveiled his second budget Tuesday, calling for about $1 billion in increased spending that would be financed by higher income tax rates on wealthy residents and savings in public worker benefits.
The first-term Democrat presented the fiscal year 2020 budget Tuesday before a joint meeting of the Democratic-led Assembly and Senate. Murphy is reviving a previously failed plan to raise income taxes on those who earn more than $1 million in hopes of paying for a $1 billion increase to the state spending plan.
Murphy wants to increase state school aid, including more money for preschool and opportunities for thousands to attend community colleges tuition free.
"We must remember that each number we write into the budget is a face the face of one of millions of New Jerseyans looking to us to put aside our differences to overcome our challenges," said Murphy.
His fellow Democrats have pre-emptively said they won't support higher taxes, and it's unclear how Murphy will navigate such a hurdle. He seemed to acknowledge the tension during his speech.
"I understand the budget I am proposing today will not be identical to the one I will ultimately sign. We will talk, we will negotiate, and we will compromise. That is as it should be. That is how our system works best," Murphy said.
Murphy's $38.6 billion proposal is roughly 3 percent higher than the current year's $37.4 billion budget, which expires July 1 and must be succeeded by a balanced plan under the state constitution.
Among the changes Murphy proposes are boosting incoming tax rates for those who make more than $1 million a year at the state's top tax rate, 10.75 percent, up from 8.97 percent.
If approved by lawmakers, that move would capture high-income earners left out of the tax hike on people making $5 million and above that Murphy and leaders agreed to last year.
The governor also says the hike would generate about $450 million and would apply to about 18,000 residents with incomes from $1 million to $5 million.
He's also seeking what he calls a "corporate responsibility fee" of $150 per worker for large employers with more than 50 employees who use Medicaid for health care. He says the fee would incentivize employers to provide benefits.
Murphy's budget has about $1.1 billion in savings, mostly from lower public worker health benefit costs that have been agreed to by labor unions.
"I am a pro-growth progressive. I want the world's biggest and best technology, clean energy, and life-sciences companies to come and expand here – but I am even more committed to the next generation being born and growing here. Reforming how we jumpstart job creation needs to be about both creating jobs and more wisely investing taxpayer money," said Murphy.
The savings are expected to come from shifting workers into cheaper health care plans, lowering costs related to out-of-network providers. It will also boot ineligible dependents from state plans, such as divorced spouses.
Murphy says the $1.1 billion in savings is a 16 percent reduction in costs year-over-year. About $200 million of the savings will come from state government staff reductions and other "departmental savings."
On the spending side, Murphy proposed increasing general fund support for New Jersey Transit from roughly $307 million to $407 million.
Murphy proposed increasing aid for education by $206 million, or roughly 3 percent. The former Goldman Sachs executive and Obama administration ambassador has said increased education aid takes pressure off local governments that levy the state's sky-high property taxes.
He's also proposing $201 million for a property tax relief program that benefits seniors and disabled residents by freezing their rates.
Murphy is also seeking to increase the state's surplus, which began the fiscal year at about $1 billion, to about $1.2 billion.
Outside the statehouse, hundreds of students from districts that are seeing cuts in school aid because of a revised funding formula called on state leaders to revisit the plan which put them in the red.
"Past efforts have fallen on deaf ears, so now we have 72 districts here representing over 10 percent of the children in New Jersey whose districts are going to be decimated," said David Healy, superintendent of Toms River Regional Schools.
Many Republicans and moderate Democrats are looking to take much more dramatic steps to cut state spending through further public employee health care and pension reform. They question Murphy's revenue projections and warn of a financial future marked with higher taxes.
"If we don't start to address the real budget problem in this state, we're going to continue down a road that makes this state more unaffordable," said Joe Bramnick, Republican leader in the New Jersey State Assembly.
(© Copyright 2019 CBS Broadcasting Inc. All Rights Reserved. The Associated Press contributed to this report.)
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