Governor Murphy signs $54.3 billion budget after chaotic few days
One GOP critic calls budget a ‘fiscal time bomb’
Gov. Phil Murphy said the budget will help ensure New Jersey remains "the best place in America to live and raise a family." (Rich Hundley III/Governor’s Office)
Gov. Phil Murphy signed a mammoth $54.3 billion spending bill Friday evening, capping budget negotiations defined by lawmakers’ efforts to slash seniors’ property taxes and a last-minute rush to ensure state government remained open.
The budget includes a doubling of the state’s child tax credit, hundreds of millions more in state school aid, a full pension payment, and the promise of property tax credits to elderly residents that some doubt will ever materialize. Both chambers of the Legislature approved it earlier Friday, despite objections from Republicans over the costs of the spending plan and the lack of details they received in advance of its passage.
“This budget provides immediate tax relief to New Jersey residents who need it most, including the new ‘Anchor’ boost for seniors and an expansion of senior freeze,” said Assemblywoman Eliana Pintor Marin (D-Essex), who chairs the Assembly’s budget committee.
The bill cleared both chambers in votes that fell mostly along party lines. Six Republican Assembly members — Michael Torrissi, Brandon Umba, Claire Swift, Don Guardian, Beth Sawyer, and Sean Kean — crossed party lines to support the bill. Republican Sens. Jean Stanfield, Vince Polistina, and Bob Singer voted in the budget’s favor in the upper chamber.
“The bottom line is that this is a budget focused on the pocketbooks of our families. We all know New Jersey is the best place in America to live and raise a family, and we are ensuring with this budget that it stays that way,” Murphy said during a signing ceremony at the Statehouse in Trenton.
The state will draw down its cash reserves to fund spending in the fiscal year that begins Saturday, leaving it with a surplus of roughly $8.4 billion the state can draw on if revenue projections continue to decline as they have in recent months.
State spending will exceed revenue by close to $1.6 billion, according to budget documents.
“With revenues dropping precipitously, it is incomprehensible to actually increase spending at the same time,” said Assemblyman Gerry Scharfenberger. “Coupled with a surplus that is expected to evaporate in a few short years, it’s a fiscal time bomb.”
Lawmakers eschewed Murphy’s proposed $2.35 billion deposit into a state fund meant to pay down debt. Instead, the state will deposit just $400 million, much of which will be immediately drawn down to fund law enforcement capital projects and meet fund-match requirements for federal transportation aid.
Roughly $2 billion remains in that debt fund. Senate President Nicholas Scutari and some other Democratic lawmakers have referred to those funds as a surplus — they are not — suggesting lawmakers may seek to drain the fund in case of a fiscal downturn.
The budget includes increased tax rebates under the Anchor program, but only for residents 65 and older. Awards for senior homeowners and renters under the program would increase by $250.
“This bill is about the future. This bill is about senior citizens and helping them to decide whether to stay in the state of New Jersey, to live in the communities that they built in the homes that they love with the people that they care most about,” said Assembly Speaker Craig Coughlin.
Democratic legislative leaders have characterized the Anchor rebate increases as a down payment of aid they say will be available beginning in 2026 under StayNJ, a proposed tax credit program intended to cut property taxes in half, to a cap of $6,500, for seniors making no more than $500,000 a year.
The program, which is projected to cost $1.3 billion when it goes into effect in 2026, will only function if the state has enough money to fund education aid, pension obligations, maintain a surplus equal to 12% of annual spending, and two tax deduction programs for seniors and military veterans.
A panel of fiscal experts in mid-June warned New Jersey is set to drain its cash reserves in the coming years even without the spending added by StayNJ, which will only grow more expensive as property taxes rise and the state’s population ages.
“If we all really believe in property tax relief, it shouldn’t be promised years down the road when we know things are ultimately going to get tougher,” said Sen. Declan O’Scanlon, the Senate Republican budget officer. “No one is predicting that we will be in better fiscal shape in 2026 than we are now.”
The state is set to allocate its remaining pool of federal American Rescue Plan money in the coming budgeting year. Language in the spending bill allocates $900 million of those funds, with the largest slices going to affordable housing and urban preservation ($275 million), capital improvements at University Hospital in Newark ($60 million), and an investment fund meant to draw businesses to urban areas ($50 million).
Those line items and others that escaped proper scrutiny during the budgeting process should have been explained to the public, Republicans said Friday.
“A dominos club got money. A lacrosse association got money,” said Sen. Michael Testa. “None of these projects — not a single one of them — was ever explained during the budget process by the governor who proposed them. He refused to identify who asked for the money.”
The budget gives Murphy a $100 million pool of federal funds he can spend without seeking legislative approval, though he can disburse no more than $20 million at once.
The spending bill does not extend a 2.5% surtax on business profits above $1 million that is set to expire at the end of the calendar year, though lawmakers could still extend the surcharge through legislation passed later this year. Business groups and Murphy have advocated for letting the surtax end as planned, over the objections of progressive groups who say the state cannot afford to lose the revenue.
The surtax’s sunset is expected to cost the state $322.5 million in foregone revenue in the fiscal year that begins July 1 and $1 billion annually in future years.
A chaotic budget process that saw committees approve a spending bill filled with errors on Wednesday — minutes ahead of a procedural deadline that would have forced the government to shut down on Saturday — will not force lawmakers to return to Trenton with a cleanup bill, said Sen. Paul Sarlo, the chamber’s budget chairman.
But Sarlo acknowledged Trenton’s seat-of-the-pants budgeting that dominates late-June days in Trenton must change.
“Clearly this house and the Assembly should take a closer look at modernizing the processes that go into the budget document,” Sarlo said.
The errors were fixed during a technical review, he said.
Murphy vetoed $38.5 million line items that he said exclusively targeted duplicates and mistakes made during budget drafting.
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