Murphy’s final budget for NJ would be 67% higher than when he started

💰 Federal funding murky

💰 Higher spending, declining revenues?

TRENTON — Gov. Phil Murphy unveiled the final budget of his two terms in office Tuesday, a nearly $58.1 billion proposal that includes more money for schools and public transit but could be upended by uncertainty over federal funding.

Murphy unveiled the budget during a speech to a joint session of the Democratic-led Legislature as he enters his final year in office. Primary campaigns to succeed him are already underway.

The governor cast the spending plan as the fulfillment of campaign promises, such as fully funding the state worker pension and consistently boosting K-12 spending, along with carving out new tax dollars for long cash-strapped New Jersey Transit.

“Though we have come far in this journey, let me be absolutely clear: We have not reached the finish line yet,” Murphy said. Citing what he called “the noise of chaos and confusion in Washington,” he pledged to set aside more than $6 billion in surplus to guard against “unforeseen challenges.”

“We're not done yet, and over the next year our absolute top priority — as it has been since Day 1 — is delivering economic security,” Murphy said.

Federal funding murky

The proposal comes amid a federal funding freeze and a congressional debate over spending, which officials said could torpedo any planning. About $27.5 billion of federal assistance in the form of aid and matching funds could be at risk, particularly for the state-administered Medicaid program, which provides health care for lower-income children and adults, according to State Treasurer Elizabeth Muoio.

Other states are facing similar circumstances.

“We’re sort of being put on notice that some draconian cuts are being presented. We don't know what they are,” Muoio said. “You can’t predict what’s going to happen but what we’re seeing is not good.”

Murphy's plan would increase spending by about 3.8% over last year's proposal. But actual proposed spending is a fraction of a percentage point below what was enacted into law for the current fiscal year. Legislative changes and supplemental spending account for the difference.

The budget's next stop is before state lawmakers, who are constitutionally required to enact a balanced spending plan by July 1.

Higher spending, declining revenues?

Murphy's concentration on tighter spending proposals comes as a couple of the state's revenue streams — specifically corporate taxes — are forecast to decline. It also coincides with Republican frustration over the state's ballooning budget, which has grown from $37.4 billion since Murphy introduced his first budget in 2018.

Indeed, Murphy has been upfront about his progressive policy preferences, and put a number of them in place over his eight years as governor. He and lawmakers raised taxes on people earning income over $1 million; they've permitted business tax cuts to lapse, which brought in more revenue to the state treasury; and have instituted new taxes. The latter include the 2.5% public transit fee paid by companies making over $10 million.

Murphy and lawmakers have also boosted funding for K-12 education, which was mostly flat at about $8 billion annually under the previous governor, Republican Chris Christie. Under Murphy, funding has gone from $8.5 billion to $12 billion in the fiscal 2026 proposal the governor unveiled Tuesday.

If enacted, the budget would set a $6.3 billion surplus, far above the roughly $500 million rainy day account Murphy inherited. Murphy and lawmakers have also promised billions of dollars in property tax relief, which the proposal would enact. But without a dedicated funding stream, it's unclear whether future administrations could continue to carry the benefits forward.

New Jersey has among the highest property taxes in the country.