Sherrill signs first budget (Updated)

Gov. Mikie Sherrill signed her first budget late Tuesday night,  a $60.74 billion spending plan that preserves billions of dollars in reserves while relying on stronger-than-anticipated tax collections to finance another year of record spending, locking in funding for schools, property tax relief, health care, transportation, pensions, and hundreds of targeted legislative priorities.

The legislature passed the budget bills earlier in the day.

The Assembly approved the budget mostly across party lines, 58-20.  One Republican, Sean Kean (R-Wall), voted with the Democrats.  Two GOP lawmakers, Aura Dunn (R-Mendham) and Alex Sauickie (R-Jackson), did not vote.  The budget passed the Senate, 26-14, with Bob Singer (R-Lakewood) joining the Democratic majority.

“When I took office, I promised New Jersey families that affordability would be the north star of every decision we made. With the passage of our first budget, we are delivering on that promise,”  Sherrill said.  “It is an affordability budget that takes on the rising costs of housing, health care, and property taxes while standing up to Trump’s chaos and cuts. It is the most fiscally responsible budget in years. It cuts our structural deficit in half and puts us in a stronger position for the future without raising taxes on individual New Jerseyans. This budget reflects our values, protects our future, and ensures doors to opportunity remain open in New Jersey.”

Senate President Nicholas Scutari said the legislature worked with Sherrill to “produce a budget that maintains our emphasis on affordability and continues our commitment to fiscal responsibility.”

“While our residents are forced to contend with cost increases due to economic policies in Washington, we made affordability our top priority by delivering record property tax relief, expanding the Child Tax Credit for working families, and strengthening support for children’s mental health services,” Scutari said.  “Even with difficult fiscal choices, we remained focused on preserving the investments that improve quality of life, strengthen our communities, and create greater opportunity for residents across the state. This budget reflects our commitment to responsible governing while ensuring New Jersey remains a place where families can succeed, and our economy can continue to grow.”

Assembly Speaker Craig Coughlin said the “budget delivers for New Jersey families and carries forward the progress we’ve made in the Legislature to make New Jersey a more affordable place to call home while being responsible stewards of the people’s money.”

“I’m especially pleased to pass a budget that includes another year of record property tax relief for New Jerseyans, including our decision to make StayNJ sustainable for retirees, so that homeowners can count on that benefit being there for them,” said Coughlin. “The budget maintains a healthy surplus while cutting the structural deficit by half, and safeguards the State against an anticipated loss in federal funding, and we did this without raising taxes on New Jersey families. We’re proud of the way this budget sticks up for our neighbors, our communities, and our families.”

State Sen. Paul Sarlo (D-Wood-Ridge), the chairman of the Senate Budget and Appropriations Committee, said that the Fiscal Year 2027 budget “will move New Jersey forward in the face of difficult fiscal conditions.”

“Working in collaboration with Governor Sherrill, the Assembly and my colleagues in the Senate, we kept the budget at $60.7 billion, the same level as proposed by the Governor. We continued our emphasis on affordability with the largest amount of property tax relief in state history and a substantial increase in child tax credits to help working families,” he said.  “We are also maintaining our commitment to fiscal responsibility with another full pension payment, the continued reduction in the structural deficit and a surplus of more than $6 billion that will help contend with economic consequences of federal cutbacks. This is a fiscal plan that positions New Jersey to meet these challenges and continue to advance the quality of life for our residents.”

Assembly Budget Committee Chair Eliana Pintor Marin (D-Newark) said the budget “reflects what responsible government looks like.”

“We reduced the structural deficit, maintained a budget of $60.7 billion, kept a surplus of more than $6 billion, fully funded our $7.3 billion pension payment, and continued our commitment to funding our schools with another record-breaking amount. We proved once again that fiscal discipline and keeping our promises to New Jersey families go hand in hand,” Pintor Marin said.   “This budget expands the Child Tax Credit by 25 percent, continues historic property tax relief, invests in supporting children’s mental health, strengthens child advocacy centers across the state, and provides critical support to organizations and many nonprofits that people rely on every day.  Behind every number is a family, a child, a senior, a veteran, a neighborhood, or an organization that someone is counting on and this budget never loses sight of that.”

Assembly Bill A5327, the Fiscal Year 2027 Appropriations Act, appropriates $60.743 billion in state funds and authorizes another $30.495 billion in federal spending, bringing the total operating budget to more than $91.2 billion.  The measure represents the culmination of weeks of negotiations between Sherrill and Democratic legislative leaders ahead of Tuesday’s constitutional deadline to adopt a balanced budget.

This is the largest spending plan in state history.

While the overall spending plan changes little from the governor’s proposal, lawmakers benefited from improved revenue forecasts, allowing them to increase spending modestly while preserving one of the state’s largest ending surpluses.

The budget authorizes spending across every department of state government, financing education, Medicaid, transportation, environmental protection, corrections, higher education, pensions, veterans’ services, affordable housing, public safety, and hundreds of grants and capital projects.

At its core, the budget reflects New Jersey’s continued reliance on a relatively small number of major taxes.

The Gross Income Tax remains the state’s largest revenue source, projected to generate $23.18 billion during Fiscal Year 2027.  Nearly all of that money flows into the Property Tax Relief Fund, which finances school aid, municipal aid, direct property tax relief programs, and other constitutionally dedicated expenditures.

Sales tax collections are projected to generate $14.65 billion before constitutional and statutory dedications are considered.  The budget also assumes $4.82 billion from the Business Alternative Income Tax, $4.08 billion from the Corporation Business Tax, and another $814 million from the Corporate Transit Fee imposed on New Jersey’s largest corporations.

Other significant recurring revenues include $1.71 billion from the Petroleum Products Gross Receipts Tax, $700 million from the Insurance Premium Tax, nearly $649 million from the Transfer Inheritance Tax, $570 million from the Realty Transfer Fee, $533 million from the Graduated Percent Fee, $467 million from Motor Vehicle Fees, and $465 million from Motor Fuels taxes.

Together, those major taxes are expected to generate nearly $29 billion in recurring revenue for the General Fund alone.

The budget begins the fiscal year with approximately $7.68 billion in undesignated General Fund resources, providing lawmakers with considerable financial flexibility as economic uncertainty continues to cloud long-term revenue forecasts.

Beyond major tax collections, the budget anticipates an additional $4.25 billion from miscellaneous taxes, fees, assessments, fines, licenses, investment earnings, and departmental revenues.

The Department of the Treasury accounts for the largest share of those collections, generating more than $1.24 billion from dozens of sources.

Among the Treasury’s largest revenue streams are $327.5 million in investment earnings, $165 million in public utility gross receipts taxes, $161.3 million from the Hotel and Motel Occupancy Tax, $116.4 million from telephone assessments, $114.3 million in commercial recording fees, $102.9 million from sports betting taxes, $43 million from ridesharing assessments, $38.9 million in domestic security assessments, and $38.2 million from utility assessments.

The Department of Human Services generates another $407 million in revenues, largely through Medicaid reimbursements and patient cost recoveries.

The Department of Health contributes more than $333 million through hospital assessments, graduate medical education reimbursements, licensing fees, and patient recoveries from state psychiatric facilities.

Environmental Protection anticipates nearly $112 million from permits, pollution fees, hunting and fishing licenses, hazardous waste assessments, water allocation fees, pesticide registrations, and dozens of environmental regulatory programs.

Transportation expects approximately $113 million in revenue, including nearly $81 million from the Good Driver Program and another $24.5 million from autonomous transportation authorities.

Lawmakers also continue the longstanding practice of shifting money from dedicated funds into the General Fund through interfund transfers.

The FY 2027 budget transfers approximately $663.8 million from special-purpose accounts.

The largest single transfer comes from the Unclaimed Personal Property Trust Fund, which contributes $285 million toward General Fund operations.

Another $104.1 million comes from the Enterprise Zone Assistance Fund, while the Universal Service Fund contributes $67.7 million.

Additional transfers include $54.3 million from the Workforce Development Partnership Fund, $41.1 million from the State Disability Benefit Fund, $20.3 million from the Hazardous Discharge Site Cleanup Fund, $15 million from the Clean Energy Fund, $13.1 million from the Supplemental Workforce Fund for Basic Skills, $12.3 million from the Spill Compensation Fund, $11.4 million from the Fund for the Support of Free Public Schools, and smaller transfers from more than thirty other dedicated accounts.

While critics have periodically questioned the use of dedicated funds to support ongoing operations, budget writers have defended the transfers as prudent cash management that allows excess balances to be redirected toward statewide priorities.

Federal funding continues to account for nearly one-third of New Jersey’s overall spending plan.

The state expects to receive $30.5 billion in federal assistance during FY 2027, supporting programs that range from Medicaid and affordable housing to education, nutrition assistance, public safety, transportation, child welfare, and environmental protection.

Education remains one of the largest beneficiaries of federal aid.

The budget includes approximately $660 million for the National School Lunch Program and another $260 million for School Breakfast programs.

Schools will receive more than $459 million through the Individuals with Disabilities Education Act, $452 million through Title I grants serving disadvantaged students, $52 million for Supporting Effective Instruction grants, $35.5 million for Student Support and Academic Enrichment grants, and more than $33 million for 21st Century Community Learning Centers.

Community Affairs receives more than $743 million in federal assistance.

Among the largest programs are $430 million for Section 8 Housing Choice Vouchers, $205.5 million for the Low Income Home Energy Assistance Program, $30 million from the National Housing Trust Fund, $23 million in Community Services Block Grants, $10.7 million for Moderate Rehabilitation Housing Assistance, $9.7 million for Weatherization Assistance, and $8 million in Small Cities Block Grants.

The Department of Agriculture receives nearly $1.19 billion in federal support, driven primarily by child nutrition programs that reimburse schools for breakfast, lunch, summer meals, and food assistance.

The Department of Children and Families anticipates more than $341 million in federal funding, including nearly $242 million for foster care under Title IV-E and another $45 million through the Social Services Block Grant.

Corrections expects nearly $19 million in federal assistance supporting reentry initiatives, technology upgrades, vocational training, tactical equipment, and criminal alien assistance.

Casino revenues continue to provide a growing stream of recurring state revenue.

The Casino Revenue Fund is projected to receive just over $1 billion during FY 2027.

Internet gaming has become the dominant contributor, generating an estimated $670.2 million.

Traditional casino gross revenue taxes are expected to generate another $181.5 million, while sports betting is expected to contribute nearly $127 million.

Additional casino taxes, investment earnings, and simulcasting revenues round out the fund.

Separately, the Casino Control Fund will collect approximately $81.3 million through casino licensing and regulatory fees.

The Property Tax Relief Fund remains one of the central pillars of the budget.

The fund totals more than $24.4 billion and is financed primarily through Gross Income Tax collections and constitutionally dedicated sales tax revenue.

Money flowing through the fund finances school aid, municipal aid, direct property tax relief programs, and other constitutionally required appropriations.

Overall, the FY 2027 budget reflects a state government that continues to benefit from historically strong income tax collections while seeking to maintain fiscal discipline through healthy reserve balances and cautious revenue assumptions.

Rather than dramatically expanding government spending, lawmakers used improved revenue projections to make targeted investments while preserving financial flexibility should economic conditions weaken.

This story was updated at 11:58 PM.