Murphy focuses on affordability in budget address as federal uncertainty looms

Gov. Phil Murphy proposed a $58.05 billion budget during his final budget address Tuesday afternoon, a slight uptick from last year’s initial budget as officials work to shrink the structural deficit.

Under the governor’s proposed fiscal year 2026 budget, spending would outpace state revenue by about $1.2 billion. In the fiscal 2025 budget, the structural deficit sits at about $1.8 billion (not including the $1.4 in additional appropriations legislators have approved since the budget passed.

“With this proposal, we are getting New Jersey’s budget back on the road toward balance so we can uphold our obligation to keep our fiscal house in the best shape possible,” he said.

The Democratic governor, who is term-limited, delivered his final budget address to a joint session of the Legislature on Tuesday afternoon.

Murphy’s proposals include tens of millions of dollars to incentivize OB-GYNs to move to the state, as well as $1 million to hire attorneys to fight President Donald Trump in court.

“We will defend the fundamental rights and freedoms of every New Jerseyan, from voting rights to LGBTQ+ rights to reproductive rights to every right in between,” Murphy said during his budget address. “And, with our Administration’s final budget proposal, we will move forward in meeting our highest priority of all: Delivering economic security and opportunity to every New Jerseyan.”

Murphy’s budget would send more than $4.2 billion in property tax relief, a 20% uptick from the current fiscal year. The majority of the relief comes through the state’s ANCHOR Program, but the state would also put $60 million into Assembly Speaker Craig Coughlin’s Stay NJ Program, which provides relief to senior citizens in the state.

Federal budget negotiations are looming large over the state’s affairs. New Jersey expects to receive $27.9 billion from the federal government, which would account for nearly a third of the state’s expenditures. But with the ongoing congressional budget process and unpredictable cost-cutting from the Trump administration, officials are preparing for potential cutbacks in federal support.

“I think it’s safe to say that we are facing more uncertainty at the federal level than at any other point in modern history,” Murphy said in his address. “And this uncertainty has a direct impact on all of us, and most importantly, the people of New Jersey. We cannot negotiate this budget in a bubble.”

The Murphy administration released a report earlier this week estimating the state could lose up to $5.2 billion in federal Medicaid funds under policies proposed by congressional Republicans.

In a briefing with reporters, State Treasurer Elizabeth Maher Muoio was blunt about the potential effects of federal cuts:

“It’s hard to predict since this is all a question mark right now,” Muoio said. “But the numbers we’re hearing are sobering.”

State Sen. Paul Sarlo (D-Wood-Ridge), the chair of the Senate Budget and Appropriations Committee, said the budget outlook changes daily as the federal funding environment changes.

“Today is really a starting point due to the uncertainty of the federal dollars,” Sarlo told reporters. “This budget could be a complete makeover in a couple of weeks or a couple of days.”

The budget proposes major cuts to higher education tuition aid. The proposal would cut more than $69 million in various student financial assistance programs, or 9.2%.

“And while, yes, every responsible budget, including this one, requires hard decisions—like scaling back programs that we would rather increase funding for—we can, and we must, make those decisions while also keeping our promises, whether it be making the full payment into our pension system or fully funding our public education system,” Murphy said.

Murphy’s budget would fully fund the state’s pension and public education systems.

School funding accounts for a major chunk of the state’s proposed expenditures. The Murphy administration expects to spend $12.06 billion to fund the state’s school aid formula, as well as more than $10 billion in other state payments toward the K-12 education system.

“With our final budget, we will once again fully fund New Jersey’s public education system,” Murphy said. “And we are also going to reduce volatility in the school funding process by ensuring that no school district sees a steep reduction in state aid from one year to the next.”

The governor proposed raising taxes and fees on internet gaming and sports gambling, cigarettes, vape products, alcohol, warehouses, firearms, and drones.

Republican legislators criticized Murphy’s proposed budget. State Sen. Declan O’Scanlon (R-Little Silver), the GOP’s budget officer in the upper chamber, said the Murphy administration should have worked harder to limit the structural deficit that’s expected to continue this year.

“We could have used the breathing room of the federal largesse, between $15 and $20 billion of it, to fix our budget, to 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,” O’Scanlon said.

The Republicans said they’ll spend the next several months looking through Democratic budget proposals. O’Scanlon said they’ll determine which cuts they support as they do more analysis, but criticized the proposed cuts to college aid for New Jerseyans.

“On its face, that doesn’t seem like a wise place to be cutting,” O’Scanlon said. “Our students here face exorbitant costs across the board: They have to find places to live and they have to pay tuition. We’re going to look and see, we’re not ready to come out in favor or opposition of any cuts.”

Even as budget season heats up, Republicans set a friendly tone.

Last week, O’Scanlon told News 12 New Jersey that he expected Murphy to “slather gallons of lipstick on this pig” of a budget. Today, as the governor shook hands with movers and shakers on the Assembly floor, he handed O’Scanlon a stick of red lipstick.

“I’m going to keep this,” O’Scanlon said while posing with the lipstick.

You can read Murphy’s budget address here. You can read the Murphy administration’s budget-in-brief proposal document here.