$11B in corporate tax breaks under scrutiny as Gov. Phil Murphy pushes for new programs

The $11 billion in taxpayer-funded incentives awarded to New Jersey businesses were under a microscope on Monday as protesters gathered at the Statehouse to demand change and lawmakers questioned state officials about how the tax breaks are doled out.

The scrutiny came as Gov. Phil Murphy has leveled a barrage of criticism against tax incentive programs approved under prior administrations, seizing on a scathing audit by the state comptroller last month to suggest the state was paying for “phantom jobs” and ordering a task force staffed with experts in white-collar crime and public corruption to investigate the programs.

But in testimony before a legislative panel Monday, State Comptroller Philip Degnan said “someone” may have cast his report in a more negative light than was intended and that his report should not be used to conclude that any company violated the terms of its agreement with the state Economic Development Authority to create jobs or make capital investments in exchange for tax breaks.

“We didn’t find that anyone was in violation,” said Degnan, who was nominated by the Murphy administration for a Superior Court judgeship last year and awaits Senate confirmation. “What we found is that the EDA did not do enough to confirm the data that was being reported to them. Whether or not those awardees were, in fact, in violation is beyond the scope of what we looked at.”

The administration of New Jersey’s tax incentives programs has become a flash point between Murphy, a Democrat, and a Democratically controlled Legislature that worked with Murphy’s Republican predecessor, Chris Christie, to approve the most controversial and expensive of the initiatives.

Those initiatives — the Grow New Jersey Assistance and Economic Redevelopment and Growth Grant programs — are set to expire at the end of June, setting the stage for a political battle over whether they should be renewed, replaced or scrapped. 

Supporters in the Legislature say tax incentives, totaling $8 billion under Christie alone, are needed to convince companies to create or retain jobs in New Jersey and have spurred historic levels of investment in cities like Camden. Companies cannot cash in on the credits until they fulfill job or investment targets.

Alyssa's Law:Gov. Phil Murphy signs Alyssa's Law, named for NJ teen killed in Florida school shooting

Minimum wage:$15 minimum wage compromise may leave NJ's poorest workers behind

Meadowlands:Gov. Phil Murphy says review of proposed Meadowlands power plant still in early stages

Murphy, however, has criticized those breaks as too generous to big businesses and argues that they crowd out investment in more pressing priorities, like infrastructure and education. While only a small fraction of the $11 billion in promised tax credits has been paid out, Murphy has said the state will lose more than $1 billion in revenue next fiscal year as companies cash in.

Murphy wants new incentive programs with award caps and rules that would direct investment into “high-wage, high-growth sectors” and urban communities.

Ahead of Monday’s legislative hearing, roughly a dozen protesters representing unions allied with Murphy and other groups gathered on the Statehouse steps to call on lawmakers to rethink the current use of tax incentives.

“It’s absurd that a dime more of tax incentives should go to corporations that isn’t matched by any kind of revenue invested in fixing homelessness and fixing poverty and fixing our schools and fixing our transportation systems,” said Brandon Castro, an organizer with the New Jersey Work Environment Council, an alliance of labor, community and environmental organizations.

Sue Altman, a board member with the grass-roots group South Jersey Women for Progressive Change, accused lawmakers of using “the poverty and challenges of places like Camden as an excuse to subsidize corporations” and criticized them for holding a hearing where only invited guests were able to testify. That restriction prevented most of the opponents from speaking.

“Today’s hearing is more of the same: It favors the credentialed, the powerful and the politically connected and it leaves out the voices of the people who these policies most directly affect,” Altman said.

Tension over New Jersey’s tax incentive programs is likely to ratchet up in the coming months as debate on the issue is tied into broader negotiations over the state’s next budget, which must be finalized by June 30 — the same day the existing programs expire.

Besides the task force created by Murphy to further review the comptroller’s report, state Attorney General Gurbir Grewal said last month that he would examine whether any laws were broken as companies cashed in on tax credits.

In the meantime, Tim Sullivan, EDA chief executive, testified Monday that his agency was improving its oversight of the tax incentive programs by adopting a new organization-wide documentation system and better monitoring companies’ job performance through a data-sharing initiative with the state Department of Labor and Workforce Development, among other reforms.

Sullivan also said the EDA was exploring “all options” to claw back any tax credits that were improperly handed out.

Email: pugliese@northjersey.com