On the agenda

Over these next weeks and months, the Legislature will debate and work through the proposal ahead of a June 30 deadline. Here are some main elements of the spending plan:

• Comes in about $70 million less than the FY 2025 adjusted appropriation ($58.1 billion)
• Includes a surplus of $6.3 billion
• Full pension payment of $7.2 billion
• $815 million in funding from the corporate transit fee to support NJ Transit
• $1.3 billion for pre-K and $12.1 billion for K-12 schools
• $2.4 billion for ANCHOR to benefit more than 2 million homeowners and tenants
• $239 million for Senior Freeze
• Completing the implantation of Stay NJ, dedicating $600 million in resources to support more than 432,000 senior homeowners
• $1.23 billion for critical investments in state, local highway and bridge projects
• $767 million for NJ Transit capital projects
• $20 million in additional funding for Strategic Innovation Centers
• Raising internet gaming and sports wagering tax rates to 25%

In addition, the budget includes tax and fee increases on: cigarettes ($0.30 per pack); nicotine products (the Liquid Nicotine rate would go from $0.10 per mL to $0.30 per mL and Container E-Liquid rate from 10% to 30%); warehouses ($2 truck traffic excise fee); certain drones (a new excise tax); cannabis (the Social Equity Excise Fee on products sold by Class 1 license holders would rise from $2.50 per ounce to $15 per ounce); and hemp products (a new $30 per ounce SEEF).

Murphy also proposed adjusting the tax on the Assessment on Real Property to 2% on sales over $1 million, and to 3% for property above $2 million. And he is asking for a new tax credit for companies worldwide to manufacture next-generation products in the Garden State.

The governor is seeking the elimination of more than $800 million in legislative add-ons, one-shots and non-competitive grants from FY 2025 budget.

“This budget builds upon this administration’s commitments to making New Jersey more affordable, prioritizing good fiscal stewardship, strengthening our economy, and building healthy communities,” said State Treasurer Elizabeth Maher Muoio. “We look forward to working with our partners in the Legislature to deliver a final budget that benefits New Jerseyans across our state.”

Legislator reaction

Reaction to the speech included a wide range of responses, depending on the issue – and party.

Scutari

Senate President Nick Scutari, D-22nd District, said that the proposal recognizes the state’s fiscal challenges. “We are confronted with more uncertain economic conditions and the threat of reduced federal aid that must be factored into budget considerations,” said Scutari. “We have to be responsible in crafting a budget that continues the progress we have made on school funding, property tax relief, debt reduction, pension payments, and services that care for the most vulnerable. At the same time, we must remain disciplined in controlling spending and identifying savings across government.”

“As we approach the months ahead, I look forward to hearing from the public in order to reach an agreement on a budget that reflects our values, delivers on our promises of affordability, and creates a brighter future for the families of our state,” said Assembly Speaker Craig Coughlin, D-19th District.

On the other side of the aisle, Republican leaders raised concerns about several issues, especially the size of the budget, the structural deficit, what kind of situation the next governor will inherit, and more.

Bucco

“When you start asking people on the streets whether they think these policies have produced a stronger and fairer New Jersey for them, I think for the most part, you will find the answer to that is no,” said Senate Republican Leader Anthony Bucco, R-25th District. “You can listen to that rosy picture that the governor just painted, but as we get into this budget cycle, and we start digging into what this budget is going to become – I say buyer beware.”

O’Scanlon

“Republicans have predicted this for years and it is a problem. This structural deficit, when it’s all said and done, will be between three and $4 billion for this next governor,” said Senate Republican Budget Officer Declan O’Scanlon, R-13th District. “We could have used the breathing room of the federal largesse, between $15 billion and $20 billion of it, to fix our budget and right our ship — to do the reforms necessary to make New Jersey sustainable for the long term. New Jerseyans are not feeling more secure in their fiscal future today than they were seven years ago.”

DiMaio

“When he [Murphy] started, the budget was $34.5 billion – it’s now a $58 billion in eight years,” said Assembly Republican Leader John DiMaio, R-23rd District. “That’s 68% in eight years – $23.5 billion more in spending. Yet schools remain underfunded all across the state.”

DiMaio said this situation is unsustainable. “We’ve said it’s been unsustainable. It’s going to go off a cliff,” said DiMaio. “He’s limping across the finish line.”

Business group leaders weigh in

New Jersey Business & Industry Association president and CEO Michele Siekerka said, “not surprisingly,” the governor’s eighth and final budget proposal represents another “unsustainable spending increase with another structural deficit built in.”

“While today’s address was light on specifics, we know it marks slight improvements from last year’s record-setting business tax increase and larger structural deficit – and maintains a surplus for the next governor,” said Siekerka. “But it also still increases other taxes to continue to support an unsustainable spending rate in New Jersey.”

Siekerka welcomed the full pension payment and full school funding – but says reforms are needed in both areas – the $815 million committed to NJ Transit from the corporate transit fee, manufacturing tax credits, and further investment in Strategic Innovation Centers. She referred to concerns about those fee and tax increases; the use of $1 billion collected from last year’s CTF proceeds; the $20 million cut to community colleges; among others.

“We also want to ensure that any cuts or stagnation in pro-growth spending in infrastructure, innovation, and workforce development are not disproportionate to areas of spending that do not yield economic growth,” said Siekerka. “These pro-growth investments should be prioritized for New Jersey’s future as well as future budget health.”

She noted the marked increase in spending over Murphy’s time in office. “While the governor has talked about trying to stimulate the economy after COVID for those increases, we know that these increases are just plain unsustainable,” said Siekerka.

New Jersey Chamber of Commerce President and CEO Tom Bracken said legislation is needed to create significant economic growth and the prosperity that the business community deserves.

“After warnings that the proposed 2026 state budget would contain significant cuts, at first glance, it closely mirrors those in each of our last seven years,” said Bracken. “It includes additional spending and increases in programs bolstering the ‘fairer’ side of our economy – but once again, little assistance to the business community to enable them to generate the sustainable revenue needed to pay for everything.”

Bracken stressed that, for years, business leaders have warned that the combination of increasing state spending and a lack of recurring revenue – would lead to a fiscal imbalance.

“You cannot increase spending by more than 65% over eight years without a balanced emphasis on sustainable, organic revenue growth through expansion of our business community,” said Bracken. “That has not happened in the governor’s two terms – and revenue is declining.”

Tax increase on gaming

Another area that drew pushback was the proposed tax increase on internet gaming and sports betting.

“The Casino Association of New Jersey strongly opposes the proposed tax increase for online gaming, which will threaten the stability of Atlantic City’s gaming and tourism industry, as well as the industry’s workforce,” said Mark Giannantonio, president, Casino Association of New Jersey. “This proposal is ill-advised and, if passed, will have significant adverse consequences for brick-and-mortar casinos.”

“The increased tax on sports betting from 13% to 25% is particularly alarming for South Jersey, which has become a hub for the gaming and tourism industry,” said Christina Renna, president and CEO, Chamber of Commerce Southern New Jersey.

“Atlantic City has particularly benefited from this new industry and any additional taxation risks reduction of consumer participation, impacting local businesses, and threatening jobs in an industry that is still recovering from the challenges of recent years. This move could drive bettors to neighboring states with more competitive tax structures, ultimately hurting the very revenue streams the tax is intended to bolster.”

And this issue also drew a rare bipartisan statement from two South Jersey lawmakers – Sens. John Burzichelli, D-3rd District and Michael Testa, R-1st District.

“Simply put, doubling the tax on online sports betting and iGaming is putting a New Jersey success story at significant risk,” the pair said. “Any effort to increase this tax on New Jerseyans threatens all of the progress New Jersey has made, especially at levels that would make New Jersey’s customers too heavily taxed. A tax increase would negatively impact jobs, industry investment, and our New Jersey customers, and it could affect future revenue growth for the state.”

Political expert analysis

Tina Zappile, director of the William J. Hughes Center for Public Policy at Stockton University, said there were no real surprises in the governor’s budget presentation – except its overall size as the highest-ever proposal we’ve seen in New Jersey.

“An extension of his State of the State address, Murphy provided more details about how he will fund his signature programs and support key projects in infrastructure, public and maternal health, public education, property tax relief, clean energy, and more,” said Zappile. “Murphy’s signature programs will be funded, including ANCHOR, Senior Freeze, Nurture NJ, Family Connects NJ, preschool education, full-day kindergarten, Cover All Children, Pharmaceutical Assistance to the Aged and Disabled (PAAD), Charge UP NJ, and Strategic Innovation Centers (SICs).”

She noted the “healthy behavior” tax increases in sports betting, internet gaming, alcohol, marijuana and tobacco products.

“These tax increases and other measures to offset costs and increase revenue will assuage some of New Jerseyans’ concerns about affording this new budget,” said Zappile, who also cited the governor’s criticism of previous administrations and Legislatures for “kicking the can down the road” by not fully funding the pensions for decades.

Murphy referenced that point in his speech – highlighting the penalty that New Jersey has paid because of that practice. “Over the past five budgets alone, we have paid, in total, a $30 billion penalty,” Murphy said during his speech. “Think about that: $30 billion is enough money to waive nearly every New Jerseyan’s property taxes.”

“Murphy translated those losses into real opportunity costs for the programs and benefits we could fund instead,” said Zappile. “Murphy clearly issued a warning for the next governor to avoid what had become common practice.”

Senate Budget Chairman Paul Sarlo, D-36th District, who plays a critical role in the process, said that this is the start of negotiations.

“The Senate Budget Committee will devote the next four months to thoroughly reviewing the governor’s proposal,” said Sarlo. “We will develop a fiscally responsible budget that addresses the priorities of the people of New Jersey, makes necessary cuts to reduce the costs of government, and to only use revenue raisers as a last resort.”

Throughout the speech, Murphy reflected on his time in office. As he closed out, he discussed his hopes for the final year in office, next year’s 2026 FIFA World Cup, and the future of the Garden State.

“More than anything, I see a future, decades from now, in which New Jersey is revered as the small state that changed our entire world forever – and for the better,” said Murphy. “And every aspect of the budget I present to you today has been crafted to make our collective dreams for New Jersey a reality.”