Gov. Mikie Sherrill submitted her first budget to the Legislature on Tuesday, a $60 billion plan that she says will shave down a severe spending deficit with cuts that many expect could cause contention with legislators during her first year in office.
Sherrill says her $60.7 billion budget achieves several of her top goals: the proposal slashes the state’s structural deficit, fully funds the state pension system, and increases allocations to the state preschool and K-12 aid formulas. Legislators expect the budget — which Sherrill called “the most fiscally responsible budget that our state has seen in years” — to be the subject of tough negotiations between a cautious Sherrill administration and lawmakers who helped spending grow by tens of billions of dollars under Sherrill’s predecessor.
“Together, [this budget] will put us on the path to balancing our budget structurally, in 2028 and beyond,” Sherrill said. “And it rewards our tough choices with savings – savings we’ll invest back into lowering costs for New Jerseyans. Providing a better future for our kids. Building a government that’s accountable. This budget is the path to getting our fiscal house in order.”
The governor’s most notable proposal is a cut to Stay NJ, a property tax-relief program for seniors heralded by Assembly Speaker Craig Coughlin. As is, the program covers half of a property-tax bill — capped at $6,500 — for seniors making up to $500,000 annually. Sherrill’s proposal would limit the program to seniors with an income of up to $250,000 and cap the relief at $4,000. Her administration says such a cut would lower the cost of Stay NJ from $1.2 billion to $700 million this next fiscal year.
“Stay NJ is a great program — it keeps seniors, so often living on a fixed income, in their homes,” the governor said. “But it benefits households that make as much as $500,000 a year. I’m changing that to safeguard Stay NJ for middle-class seniors. If you make $250,000 or less, your tax relief is in this budget. That’s going to save taxpayers hundreds of millions of dollars a year.”
The proposed cuts set up a potential conflict with Coughlin, who has heralded Stay NJ as a major accomplishment of his tenure. In a background briefing, an administration official said they had discussed budget proposals with legislative leaders but offered few details on the substance of those discussions.
Sherrill had warned of cuts ahead of her address. In a press conference last month, she said the state faced a “serious” $3 billion structural deficit and promised not to raise taxes on New Jerseyans. Her proposal cuts the structural deficit to $1.7 billion, which would leave the state about $5.4 billion in reserves after this upcoming fiscal year. If not addressed, she said the current structural deficit would empty the state’s coffers in two years.
Administration officials say they’ve targeted $2 billion in “tough” spending cuts, of which about a quarter would come from Stay NJ savings, and about $700 million in one-time appropriations. She plans to maintain two other property-tax relief programs: ANCHOR at $2.3 billion and the Senior Freeze at $350 million.
A “perfect storm” of factors conspired to cause the state’s fiscal problems, Sherrill said. Decades of pushing off pension payments is now costing the state more than $6 billion a year, she said, and the end of federal COVID aid closes a spigot of easily obtained funds. Now, rising costs are pushing spending up without easy revenue options.
The Sherrill administration said the Trump-backed H.R. 1 has increased administrative costs for SNAP food benefits and Medicaid coverage. The budget proposes more than $100 million to help counties cover the costs.
“Costs in New Jersey are among the nation’s highest, and that affects everything: families, businesses, schools, property taxes, the state budget,” Sherrill said. “And Trump’s cuts are about to make everything worse. Because Washington refused to extend Affordable Care Act credits, nearly half-a-million New Jerseyans will see their premiums triple this year. And because his H.R.1 law makes people jump through hoops to stay on Medicaid, 300,000 more New Jerseyans will be kicked off.”
Her budget also includes more than $1 billion in state aid for NJ Transit and $7.2 billion in state funding for New Jersey’s Medicaid program.
In fiscal year 2026 — former Gov. Phil Murphy’s final budget — total revenues ended up at about $57.5 billion. Sherrill’s budget expects revenue to rise to $59.1 billion next year, largely fueled by a nearly $1 billion increase in corporate tax fee collections, which the administration says will come from closing loopholes. Murphy’s final budget ended with about $59.7 billion in spending, and Sherrill’s budget bumps that amount up by less than 2%, up to $60.7 billion.
Though Sherrill’s proposal cuts the structural deficit, it’s ultimately up to legislators to deliver her such a budget. But after the governor’s initial proposal, budgets typically inflate as they work through the Legislature. Murphy proposed a $58.1 billion final budget — legislators ended up passing a $58.8 billion budget, and they’ve since tacked on nearly $1 billion more in supplemental spending.
Sherrill said she won’t stand for such bloating. In her address, she declared “special interest giveaways” to be over, and she criticized her predecessors for allowing
“Our work starts by ending previous administrations’ bad habit of tacking last-minute giveaways onto each budget,” she said. “These days, we simply can’t afford that.”
Her opposition to the practice could cause consternation among lawmakers. Defenders of the practice say the funds help deliver key projects to their constituents. But both she and administration officials have said that if legislators want to add spending, they must be willing to cut something else.
“If there are things you think we need to add — come to me with places we can cut,” she told a packed Assembly chamber. “It’s simple math: any additions require subtractions.”
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