New Jersey leaders are poised to enact a record new $56.6 billion state budget for the fiscal year that begins Monday.
After another rushed budget process, the spending plan is expected to pass both houses of the Democratic-controlled state Legislature on Friday afternoon, and then head to Democratic Gov. Phil Murphy, who may sign it hours later.
Like all budgets, this one touches on all aspects of Jersey life. Taxes, pensions, schools. Help for poorer residents and property taxpayers. Bucks for roads and rails and lawmaker pet projects. And lots and lots of spending, more than ever before.
“This budget is an incredibly strong one,” Murphy said Thursday during his latest call-in TV show on News 12 New Jersey. “We are making the investments we need to make to have a bright future in the state of New Jersey, not just for some but for everybody.”
Here’s a look at how it can affect you:
Taxes and fees: Who gets hit
The biggest tax increase goes to the very biggest corporations. It’s a 2.5% “corporate transit fee” on the 600 companies in New Jersey that make at least $10 million a year in profits, retroactive to Jan. 1. The aim is to send the cash to NJ Transit, which sorely needs it, but that won’t begin until 2026. Business leaders hate it, saying it will give the state the nation’s highest business taxes and hurt the economy. Advocates say NJ Transit commuters, who are already getting hit with higher fares, need the help.
The budget will also cost many residents more. People who buy electric vehicles will have to start paying 3.3% in sales tax for the first time, perhaps as early as the fall. In July 2025, all electric vehicles sold would carry the state’s full sales tax of 6.625%. And it eliminates some freebies from prior years. For the past few years, the state boasted that residents could get into state parks for free over the summer. Now you’ll have to pay. Also gone: the sales tax holiday on back-to-school items just before Labor Day.
It could have been worse
Yeah, some Jersey leaders wanted to raise taxes and fees more.
Murphy and state Senate President Nick Scutari, D-Union, suggested increasing the sales tax back to 7% during budget talks in an effort to raise more revenue, but that was nixed by state Assembly Speaker Craig Coughlin, D-Middlesex. Lawmakers also scrapped Murphy’s proposals to impose a $1 tax on every truck delivery to New Jersey’s many warehouses and to substantially raise fees on individual gun permits and gun seller licenses in the state.
What about our sky-high property taxes?
Homeowner property taxes in New Jersey — the highest in the nation — always go up, but the budget funds programs that ease the burden for many, but not all, taxpayers. There’s more than $2 billion to cover a third year of funding for the ANCHOR tax relief program, which gives 1.3 million homeowners up to $1,750 and more than 700,000 renters up to $700 to help offset property taxes. New funding is expected to make another 58,000 seniors eligible for the Senior Freeze program.
And there’s $220 million more in ramp-up funding for the Stay NJ property tax cut for New Jersey seniors, which is slated to take effect two years from now despite ongoing questions about how the state will pay for it. The Assembly’s budget committee approved a bill (A4706) Thursday that would install recommendations released last month by the Stay NJ Task Force on how to implement the program.
“We made it a priority to establish a streamlined, simplified application process next year for seniors to maximize their property tax relief and we are well on our way to doing that,” Coughlin, the law’s main architect, said in a statement.
Are public-worker pensions finally safe?
We can never answer that question because for years, New Jersey’s pension system was underfunded by state leaders from both parties, making it among the worst-funded in the nation — and nobody knows if this will be repeated in the future if times get bad. But the budget has a full $7 billion payment to the public-worker pension fund, which supports the retirement of about 800,000 active and retired state and local government workers. This is the fourth straight year there has been a full payment.
Big bucks for schools
State leaders say the roughly $12 billion allocation for public schools is the first time there is a full payment to under the state funding formula. But not every district will see an increase in aid, under the heavily debated formula based on districts’ enrollment, poverty levels, the strength of their tax base, and other factors year by year. Districts may gain, lose, or receive the same aid in any year depending on those factors.
Other spending
A sampling of other priorities the budget funds:
- About $700 million in new spending added by lawmakers for various projects they want funded, from baseball complexes to soup kitchens. These are often derided by critics as “Christmas tree” items.
- Keeping the recently expanded Earned Income Tax Credit, the Child and Dependent Care Tax Credit, and the Child Tax Credit (which allows parents with young children to receive up to $1,000 per child).
- $120 million to finish the State Police Training center.
- $91.8 million for food assistance programs.
- $57 million to help increase affordable housing. That includes funding for some towns to develop some units as single-family homes, such as apartments in basements and garages or smaller houses in backyards, under a time-limited pilot program.
- $30 million for a two-year initiative to help end homelessness among military veterans.
- $21 million to convert rooms at the state-run veterans’ nursing homes from double rooms to single rooms, to prevent the spread of illness, plus $2 million to replace equipment and mattresses at the veterans’ homes.
Can we sustain record budgets in the future? Nah.
Leaders from both parties caution that the state faces big budget woes in future years. There’s a surplus of nearly $6.2 billion in the plan, but there’s a structural deficit of more than $2 billion, meaning the state might have to pull from reserves to cover some spending. A budget expert from the nonpartisan state Office of Legislative Services said in the spring that if the state continues to spend down its surplus at this rate, this would “raise concerns about the sustainability of the state’s fiscal path.”
Murphy said Thursday the state has deliberately spent “more money than we are taking in” after the COVID-19 pandemic to help “jump-start the economy.”
“But you can’t do that forever,” he said. “So clearly the work to do over the next couple of years is gonna be to get that back in balance. That’s either by revenues that are strong — and I think our future is bright in that respect — or tough decisions on expenses.”
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NJ Advance Media staff writers Jelani Gibson, Larry Higgs, and S.P. Sullivan contributed to this report.
Susan K. Livio may be reached at slivio@njadvancemedia.com. Follow her on X @SusanKLivio.
Brent Johnson may be reached at bjohnson@njadvancemedia.com. Follow him on X at @johnsb01.