(Bloomberg) -- New Jersey Governor Phil Murphy signed a budget that closes the revenue gap caused by the pandemic with $4.5 billion of borrowing, enough to cover about 14% of the state's spending.
The plan for a truncated nine-month fiscal year raises the income-tax rate to 10.75% from 8.97% for those earning at least $1 million a year. It also extends what was to be a temporary 2.5% surtax on corporations with income of $1 million or more.
The state will make a $4.7 billion pension payment, or $200 million less than Murphy had pitched. It plans on a $2.5 billion surplus, $300 million more than Murphy's proposal, to protect against the impact of a second wave of the novel coronavirus, which is linked to more than 16,000 deaths in New Jersey.
Murphy, a Democrat, won a court ruling to borrow after Republicans challenged the step on state constitutional grounds. A four-member panel of lawmakers on Monday approved allowing a net interest cost of as much as 6% in the capital markets when New Jersey issues the general-obligation bonds.
New Jersey previously lengthened the current fiscal year by three months, and shortened the next, as shutdowns decimated revenue and complicated projections. Fiscal 2021 will start on Oct. 1.
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