New Jersey Gov. Phil Murphy, a term-limited Democrat, unveiled a $58 billion budget on Tuesday amid immense uncertainty about whether billions of dollars the state counts on from Washington will show up.
Murphy’s final spending plan before leaving office next year is $70 million smaller than last year’s, a sign of belt-tightening. It includes a $6.3 billion surplus.
Facing Federal Uncertainty
The budget proposal does not try to predict what cuts President Donald Trump, DOGE or a Republican Congress may make to federal spending over the next year, but Murphy administration officials are bracing for impact.
Murphy said there is more uncertainty in Washington now than “at any other point in modern history” and the state budget cannot be negotiated in a bubble.
“There is a distinct possibility that we will, instead, need to pursue a ‘break the glass’ strategy,” the governor warned, according to prepared remarks of his annual budget speech. “What that looks like, we cannot yet say. But we must acknowledge — and adapt to — this new reality.”
The state has had to scrap its early numbers before, including the budget proposal Murphy made just before the pandemic in 2020.
Budget Highlights and Challenges
This year’s budget proposal, which covers spending from July through the end of next June, doesn’t have many new big-ticket items. It includes modest line items to expand pre-K, $50 million for reproductive rights programs, and $1 million to staff up the Attorney General’s Office, which is fighting Trump administration policies and spending freezes.
The budget includes $1.2 billion in new taxes and fees, according to administration officials. The largest among them would hike taxes on online gaming and sports betting to 25 percent, which will bring in $404.4 million to the state; increase taxes on the sale of property known as the Realty Transfer Fee, which is expected to bring in $317 million; and expanding what is subject to the sales tax, which will bring in $277 million. Smaller tax and fee increases would apply to cannabis, cigarettes, and alcohol.
Planning for the Future
The budget includes $4.3 billion for various forms of direct property tax relief. That figure, including money for Murphy’s ANCHOR rebates and for Assembly Speaker Craig Coughlin’s StayNJ program for seniors, amounts to more than 5 percent of the budget.
The largest new spending is $815 million to fill the long-anticipated hole at NJTransit. In the current budget year, which began last summer, the governor levied a “corporate transit fee” on the state’s largest businesses to raise money for the transit agency, but the governor is planning to use the $1 billion being collected this year to pad the surplus.
Ensuring Fiscal Stability
That surplus, 15 times larger than the one the Democrat inherited from Republican Gov. Chris Christie in 2018, is something Murphy views as part of his legacy, along with making huge multibillion-dollar pension payments each year. One budget document from the administration describes the budget as “leaving New Jersey better than we found it.”
State Treasurer Elizabeth Muoio acknowledged that New Jerseyans aren’t going to be picketing in the streets for a larger surplus, but if there was ever a reason to, it would be the federal uncertainty right now.
Addressing Federal Funding Challenges
Even a robust rainy day fund can’t handle some of the scenarios state officials worry about. Budgeted at $6.3 billion, New Jersey’s surplus “is not going to handle a $10 billion hit to just Medicaid or some of these other changes we’re seeing,” the treasurer said in a briefing for reporters ahead of the governor’s speech.
New Jersey gets about $27 billion a year from the federal government, about half of which is to help provide Medicaid insurance to 1.8 million low-income and disabled residents.
The money from Washington isn’t counted as part of the $68 billion figure for the state general revenue budget. Yet each lost federal dollar means the state has to choose between letting whatever program the feds were funding wither or ponying up to keep it going. That’s especially hard for Medicaid because of its sheer size and because of the consequences of pushing the state’s most vulnerable people off health insurance.
Building Resilience and Stability
“When it comes to Medicaid, it’s these people’s lives, their health, so it’s very sobering,” Muoio said.
During a trip to Washington last week, Murphy and other governors — from red and blue states alike — expressed concerns about the steep federal cuts President Donald Trump and House Republicans are considering to Medicaid and other spending programs. Some congressional Republicans, including New Jersey Rep. Jeff Van Drew, are balking at Medicaid cuts too.
Conclusion
Despite the challenges posed by federal uncertainty, Governor Phil Murphy’s budget proposal reflects a strategic approach to fiscal responsibility and future planning for New Jersey. By addressing funding challenges and planning for various contingencies, the state aims to maintain stability and resilience in the face of fiscal risks.
