N.J. Gov. Phil Murphy proposes a record $58.1B budget, but federal funding uncertainty is a concern

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New Jersey Gov. Phil Murphy unveiled his 2026 fiscal year budget Tuesday afternoon at the State House. The $58.1 billion proposed state spending plan is the largest in the Garden State’s history, about $2 billion more than last year.

At the start of his address, the governor said his top priority is delivering economic security and opportunity to every New Jerseyan.

“Whether it be the skyrocketing cost of eggs, or a housing market that is hotter than ever, our state’s working- and middle-class families are worried — on a fundamental level — about being able to make their future in the Garden State,” Murphy said.

Dr. Tina Zappile, director of the Public Policy Center at Stockton University, said Murphy’s budget proposal defines how the signature programs he discussed in his State of the State Address will be paid for.

“New Jersey will see healthy behavior tax increases in sports betting, alcohol, marijuana and tobacco products, which are generally popular and likely to be supported across the state,” she said. “These tax increases and other measures to offset costs and increase revenue will assuage some of New Jerseyans’ concerns about affording this new budget.”

Dr. Charles Steindel, former chief economist for the state Treasury Department and member of the Multi-Year Budget Workgroup at Rowan University’s Sweeney Center for Public Policy, called Murphy’s proposal “a fairly cautious budget, at least on the revenue side.”

“Looking past the proposed tax hikes, the revenue projected is pretty much in line with the pessimistic scenario our group outlined last week,” he said. “The proposed tax increases are largely in more discretionary areas, such as gaming, though given the price of housing in New Jersey, many buyers will be paying that higher transaction tax on million-dollar homes.”

Tax relief

Murphy proposes record-high tax relief to residents with another round of ANCHOR property tax savings. It provides the average taxpayer with a rebate of $1,500. The ANCHOR program also provides renters with at least a $400 rebate.

“Back in 2018, the average, eligible homeowner in New Jersey received $246 in property tax relief,” he said. “This year, that average tax relief payment will be over $1,500, more than a 500% increase in just seven years.”

Murphy is also proposing a new sales tax exemption for cribs and other critical baby supplies to make life more affordable for families and announced hundreds of millions of dollars for the Stay NJ program that will reduce taxes for seniors by 50% in 2026. He also proposed more than $100 million to support Jersey’s Cover All Kids health care program.

Education

The governor’s spending plan calls for fully funding the state’s K–12 public education system.

“Altogether, our budget will provide the single largest investment into New Jersey’s public schools in history,” he said.

The budget also includes additional funding for free, full-day pre-K.

“This is our North Star,” Murphy said. “Because every child should be positioned for academic success, especially at the earliest stages of life.” He said the spending plan will also help support a new priority: working with districts across New Jersey to ban cell phones from K–12 schools.

“We are going to provide several million dollars to a group of school districts that are interested in making the switch to phone-free schools, so our students can remain focused on their studies, and our educators don’t have to compete with TikTok for their attention,” he said.

Murphy also announced plans to expand funding for First Lady Tammy Murphy’s Nurture NJ initiative, which includes a free home visitation program for new mothers and babies.

The spending proposal calls for:

• Increasing funds for a program to offer down payment assistance to first-generation homebuyers
• More money for the Department of Community Affairs for the Affordable Housing Trust Fund
• Additional funds for the Labor Department’s apprenticeship programs
• Increased funding for NJ Transit to build and repair train stations and buy new rail cars
• Fully funding the state pension system obligation with a $7 billion payment

The governor said his budget includes more than a $6.3 billion surplus, “just in case it’s needed.”

The elephant in the room

Murphy said his budget has been carefully constructed to save taxpayers money while funding critical programs and services. But, he reiterated that federal cuts could have a profound impact on what happens going forward.

“We cannot negotiate a budget in a bubble, and while I sincerely hope the situation in Washington settles down, and that we in turn have a normal, healthy budget season over the next few months, that is by no means a guarantee,” he said.

New Jersey receives about $27.5 billion in federal funds annually for Medicaid, transportation, education and numerous other programs, however it’s unclear whether those funds will be forthcoming or trimmed this year.

During a briefing with reporters, Treasurer Liz Muoio expressed concern about the uncertainty and said if funding is cut significantly by President Donald Trump’s administration, “everything is on the table.”

Murphy said if his budget faces significant cuts because of a lack of federal funding, his administration will need to pursue what he described as a “break-the-glass” strategy.

“What that looks like, we cannot yet say. But we must acknowledge, and adapt to this new reality,” he said.

Murphy then made a series of promises.

“If this administration tries to attack our most vulnerable neighbors, I will never back down from defending their rights and freedoms,” he said. “I will never back down from defending the members of our LGBTQ+ community — because their identities are not up for debate. I will never back down from defending civil rights — or the rights of educators to teach the full truth of our history. I will never back down from defending our immigrant families.”

He added he will defend police officers and protect women’s access to reproductive health care and, especially, their right to an abortion. Murphy announced a new OB-GYN incentive program to attract doctors and medical professionals from across the nation to come to the Garden State.

“My priority is ensuring that every woman can access the best possible health care, when they need it. Period,” he said.

Other programs that are targeted to receive funding in the new spending plan include:

• Arrive Together, an initiative that pairs mental health professionals and police to respond to emergencies
• Addiction treatment services
• High-tech innovation centers that encourage entrepreneurs

Strip it down to the studs

Senate Republican Budget Officer Declan O’Scanlon said last week that Murphy’s budget proposal would require “slathering gallons of lipstick on a pig.”

After the governor’s speech, O’Scanlon said Murphy’s proposal “is that pig,” adding that it will dump the state’s problems onto the next governor. Murphy, who is term limited, will leave office in 2026.

“Republicans have predicted this for years,” he said. “The structural deficit that [Senate Republican Leader Anthony Bucco] mentioned and [Assembly Republican Budget Officer Nancy Muñoz] mentioned is going to end up, when all is said and done, between $3 and $4 billion for this next governor that’s coming in.”

O’Scanlon also took exception to Murphy who asked “what would you cut” during his speech when challenging critics.

“What a lame lie,” the Republican said. “Republicans have presented comprehensive alternatives every single year and they were ignored.”

Muñoz, in criticizing the speech, said she “never heard a budget address that didn’t even mention the budget before.”

“This upcoming budget is anything but affordable,” she said. “We need to strip it down to the studs and rebuild responsible spending.”

Republican leaders said they intend on doing a deep dive into Murphy’s proposal to see what cuts they can fight for.

“We will have hundreds of millions of dollars in cuts easily, we just have to see what’s back in the budget,” O’Scanlon said. “We only have a budget in brief, so there’s not a lot of specifics yet.”

Murphy said his spending plan “is one that reflects our ongoing and unrelenting commitment to building a state that is stronger, fairer and more prepared for the future. Above all, we are going to transform our dreams for New Jersey’s future into a reality.”