If all goes as planned, New Jersey is scheduled to dole out $3.5 billion in property tax relief to residents in 2026. But so far, state leaders are setting aside less than 15% of the money that will be needed.
Gov. Phil Murphy and top state lawmakers agreed this week to add another $20 million more to ramp up Stay NJ in the new state budget for the fiscal year that begins July 1, according to three sources familiar with negotiations.
That’s on top of the $200 million in funding Murphy already proposed for this budget — expected to be finalized Friday — and the $100 million set aside in the spending plan that took effect last year.
While Stay NJ, the historic but expensive plan to drastically cut property taxes for New Jersey seniors, is getting more funding than originally expected, there are still hefty concerns about whether the state will be able to afford it in time for the 2026 launch date.
There is “absolutely” uncertainty about paying for Stay NJ, one source told NJ Advance Media. That sets up a potential fight for next year’s budget, when the state will have to approve the rest of the needed funding, sources said.
The tax relief plan would slash property tax bills for most senior citizens in the state by 50%, capped at $6,500. When combined with the current ANCHOR and Senior Freeze tax relief benefits, the regime would cost $3.5 billion in 2026, the year Stay NJ is slated to begin.
The state also needs to hit various benchmarks, including full school and public-worker pension funding and a 12% budget surplus, before Stay NJ can be paid out.
How it happened
State Assembly Speaker Craig Coughlin, D-Middlesex, the program’s main architect, had been seeking more money for Stay NJ in the new state budget. He had even suggested using a portion of a new tax on corporations to fund NJ Transit and setting it aside for Stay NJ.
But that didn’t happen. Murphy and lawmakers agreed to give all of the tax to fund the cash-strapped mass transit agency.
One source said Murphy’s team was “firm on that.” Another source said Murphy and state Senate President Nick Scutari, D-Union, both objected to using part of the transit fee for Stay NJ.
Leaders did agree to forgo a sales tax increase to help bolster this budget — a hike Coughlin publicly opposed.
A source said the additional ramp-up funding for Stay NJ that Coughlin secured in this budget is “not as much” as he wanted, but it’s “symbolic in terms of there’s a further commitment to getting (the program) done.”
Another source said they were surprised Coughlin aimed to stop the sales tax bump because that might have helped pay for Stay NJ.
Coughlin’s office did not immediately return a message seeking comment Wednesday.
Thus, the big fight over Stay NJ funding is pushed to next year. The source said that budget is likely to be “an even bigger fight than this year” because leaders will have to rein in spending and get the state government’s “structural deficit under control.”
Often when money is low in Trenton, tax cut programs are among the first on the chopping block.
Leaders would also have to secure funding to continue the popular ANCHOR tax cut, a broader program that gives 1.3 million homeowners — regardless of age — up to $1,750 and more than 700,000 renters up to $700 to help offset property taxes. That has so far been funded for three straight years, and there may be more political will to make sure that continues.
A large concern for Stay NJ: The state budget set to take effect next week has a surplus of 10%, but the Stay NJ law said it needs to be 12% for the program to launch. The worry is that number may be tough to get to next year as the state faces fiscal strain and uncertain tax revenue after years of big spending.
One solution floated has been to pass a new law lowering the surplus threshold, but one source said the governor’s office is concerned that could trigger the state getting a credit downgrade from Wall Street.
Coughlin is expected to keep pushing for the program not only because he championed it but all 80 seats in the Assembly are on the ballot next year. So is the governor’s office, and the speaker is considered a possible candidate.
What’s next?
Committees in the state Senate and Assembly are expected to approve the new state budget Wednesday at the Statehouse in Trenton. The full state Legislature is on pace to pass the plan Friday, and the governor is likely to sign it into law that evening.
As officials finalize this year’s spending plan, some are already looking ahead to what has to happen next to make Stay NJ a reality.
Assembly Democrats plan to introduce a bill that would implement recommendations released last month by the Stay NJ Task Force on how to execute the program.
The task force’s 101-page report laid out drastic changes to how the state’s property tax benefits would work together.
Stay NJ, in conjunction with ANCHOR and Senior Freeze, is designed to slash property taxes by up to 50%, capped at $6,500, for senior citizens in New Jersey who earn less than $500,000 a year.
The calculation of the benefits would take several steps. First, the Treasury Department would add up a senior’s ANCHOR and Senior Freeze benefits. If it’s less than 50% of their property taxes maxed out at $6,500, the senior would get an extra check under the Stay NJ name.
No one would get less than what they get today.
Homeowners not eligible for ANCHOR or Senior Freeze but eligible for Stay NJ would receive the maximum Stay NJ benefit of $6,500 or 50% of their property taxes. And renters, who are not eligible for Stay NJ or Senior Freeze, would continue to receive the ANCHOR benefit by check or direct deposit.
While taxpayers would initially get checks, the Stay NJ payment would eventually be a credit directly on their tax bills.
The recommendations also would create one application for all three tax breaks by Feb. 1, 2025, which means legislation creating the application would need to be passed at least 90 days prior.
In the meantime, letters notifying taxpayers about the next ANCHOR benefit, which is for the 2021 tax year, are expected to go out sometime this summer.
Please subscribe now and support the local journalism YOU rely on and trust.
Karin Price Mueller may be reached at KPriceMueller@NJAdvanceMedia.com. Follow her on X at @KPMueller.
Brent Johnson may be reached at bjohnson@njadvancemedia.com. Follow him on X at @johnsb01.