New Jersey Gov. Mikie Sherrill unveiled the first spending plan of her term on Tuesday, proposing a $60.7 billion budget that calls for what she’s describing as record property tax relief, as well as historic levels of funding for schools — both of which could ease burdens on New Jerseyans struggling with the state’s affordability crisis.
But with the state facing a deep gap between its spending commitments and revenue, Sherrill is nonetheless risking accusations of going back on a campaign promise not to raise taxes.
Some higher-income Garden State seniors could soon lose access to a tax relief program intended to keep them from fleeing the state, just weeks after they got their first checks from the program. And Republicans are deriding other changes that the governor describes as closing tax loopholes for businesses, saying they amount to more taxes in an already expensive state.
Sherrill’s proposal for the fiscal year ending in 2027 calls for several cuts to keep New Jersey’s budget relatively flat. The plan would increase the budget by just 1.6%, about $980 million less than the current fiscal year’s budget.
The budget proposal projects state revenue to remain essentially flat compared to the current fiscal year.
“This is the budget we can afford,” Sherrill said in a presentation to the Legislature on Tuesday. “If there are things you think we need to add — come to me with places we can cut. It’s simple math: Any additions require subtractions.”
State income tax revenue continues to beat expectations. Corporate tax collections have lagged but are expected to rebound in the next fiscal year.
Sherrill campaigned on a promise not to raise taxes, but whether her first budget proposal lives up to that pledge depends on how you feel about what the governor’s office describes as closing loopholes in existing tax law.
The governor’s budget plan relies on increasing revenue by making it harder for businesses to avoid paying taxes.
The plan calls for capping corporate net operating loss deductions at $1 million for the next three years; Sherrill says such deductions have been abused since the COVID-19 pandemic. She’s looking to limit the alternative business calculation deduction to small businesses, scaling back a mechanism created to help mom-and-pop operations stay afloat during the Great Recession.
“That helps warehouse workers, cashiers, healthcare aides – people who keep our economy running,” Sherrill said. “It’ll reduce strain on hospitals, easing the expected surge in ER care, the most expensive kind [of healthcare]. And it’ll raise $145 million a year, to cover Trump’s extra Medicaid costs.”
Republican lawmakers said the tax changes were essentially tax hikes.
“That revenue that’s going to be raised is going to be borne not only by the businesses, but by the consumers that those businesses sell to,” state Senate Minority Leader Anthony Bucco said. “Businesses don’t just eat those expenses; they pass it on in the products and services. So that’s going to land squarely on the backs of our taxpayers.”
Sherrill also wants a new fee on businesses with at least 50 employees enrolled in NJ FamilyCare to help the state pay for the program.
Between spending cuts and new revenue, the new budget trims the structural deficit from $3 billion to $1.6 billion.
That’s progress that puts the state on track to eliminate the structural deficit in the coming years, Sherrill said, but it still means New Jersey will need to spend almost $2 billion from the state surplus.
Sherrill blasted the budgeting decisions of her predecessor, Murphy, for exacerbating New Jersey’s long-term financial problems.
“In the final working days of the last administration, New Jerseyans were stuck with nearly $3 billion in extra spending — $2.5 billion in corporate tax breaks and $240 million in giveaways,” Sherrill said. “That can’t happen. We can’t afford that process anymore. It’s not accountable; it’s not efficient; it’s not what the people of New Jersey deserve.”
Major uncertainty hangs over this budget and New Jersey’s financial future, due to persistent inflation and drastic changes to federal policy since the start of President Donald Trump’s second term.
Trump’s signature law — the “One Big, Beautiful Bill” — drastically increased costs for states by slashing federal funding for social safety net programs like Medicaid, the Affordable Care Act and SNAP.
“Right now, we’re facing a perfect storm of fiscal challenges; short-term and long-term, federal and state,” Sherrill said.
Property tax remains a central part of New Jersey’s affordability crisis. The average combined municipal, school and county property tax bill in the Garden State was $10,570 last year, according to the state.
Sherrill is proposing $4.2 billion for property tax relief. The bulk of that would be split among three programs: $2.3 billion for the ANCHOR rebate program for homeowners and renters; $350 million for the Senior Freeze program that limits tax increases for some senior homeowners; and almost $700 million for the Stay NJ program.
Stay NJ, which is the signature policy achievement of Assembly Speaker Craig Coughlin and was instituted during former Gov. Phil Murphy’s tenure, is currently funded at $1.2 billion.
The program faces a drastic scaling back amid Sherrill’s proposed spending cuts, setting up what could be an intraparty showdown at the State House in the coming months.
Coughlin issued a statement after Sherrill’s speech that didn’t explicitly mention Stay NJ, and only said he looked forward to working with the governor on making property tax relief programs more sustainable.
Stay NJ pays senior homeowners up to $6,500 to help cover their property taxes. The program began mailing its first checks last month, but it has faced criticism for its eligibility rules, which allow households with incomes as high as $500,000 to benefit.
Sherrill is calling for the income limit to be lowered to $250,000 and for the benefit to be capped at $4,000.
“Stay NJ is a great program. It keeps seniors, so often living on a fixed income, in their homes. 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,” Sherrill said. “That’s going to save taxpayers hundreds of millions of dollars a year.”
Republicans seized on the proposed Stay NJ cut as a hypocritical move after Democrats spent years promising to get the program enacted.
“The last thing that should be cut is property tax relief,” said state Sen. Declan O’Scanlon, who is the Republican budget officer in the Senate. “It kills me that people say that’s the first thing that should be on the chopping block.”
The ANCHOR program, which currently sends checks of up to $1,750 to homeowners and up to $700 to renters, already has a $250,000 income cap.
Sherrill’s proposal would change ANCHOR to remove the $250 bonus the program currently offers to senior homeowners and to remove overlap with Stay NJ.
Sherrill is calling for an increase in state aid to $12.4 billion, the largest amount ever and a 3.1% increase over the current fiscal year.
O’Scanlon said he hopes Democrats in Trenton will make changes to the formula that determines how state aid is distributed among New Jersey’s roughly 600 school districts.
“All that money, virtually all of it, is going to a handful of districts, while hundreds of districts are left choking on fumes,” O’Scanlon said.
Sherrill is proposing hiring a new cadre of experts to monitor and assist local school districts in managing their finances.
That idea comes as districts around New Jersey face budget crises from either prior cuts to state aid or their own financial bungling.
Beyond grade schools, Sherrill is calling for increased funding for pre-K programs at hundreds of districts, and $582 million for the state’s child care assistance program, which would allow 2,500 more children from low-income families to receive subsidized child care.
Sherrill’s budget proposal includes a $7.3 billion payment to the state’s pension system.
The governor said she was proud to ensure the state meets its commitment to public workers, but criticized past governors of both parties for failing to make their own payments. If full payments had been made in the past, the pension payment in the new fiscal year would be $1.15 billion.
“Imagine what we could be doing with that money, if for 30 years, elected officials hadn’t mortgaged our kids’ futures,” Sherrill said.
Sherrill’s address kicks off the annual budget process in Trenton. State lawmakers will now hold hearings before drafting, debating and voting on a budget bill. Once a bill is passed, Sherrill will decide whether to sign it or issue a veto.
All of this will play out over the coming months. New Jersey must adopt the budget for fiscal year 2027 by the end of June, or the state government will shut down on July 1.
Democrats hold large majorities in both the state Senate and Assembly. But those majorities span a range of ideological viewpoints, and some of the cuts Sherrill is proposing target past party priorities, such as Stay NJ.
A joint statement from Senate President Nick Scutari, Senate Majority Leader Teresa Ruiz and Senate budget chair Paul Sarlo said the Legislature is “well-equipped to address these challenges” and would work with Sherrill to “develop a budget that reflects our residents’ priorities and addresses the needs of our state responsibly.”
Republicans have urged Sherrill and Democratic lawmakers to make the budget process more transparent.
It’s been common in recent years for lawmakers to introduce the budget bill – a document that is typically hundreds of pages long – just days or hours before a final vote. Fiscal hawks and open government advocates have long criticized that rushed process.
“If this process rolls out in an open and transparent manner, and we actually get a budget ahead of time that we’re able to debate and talk about, and the press is able to look through and ask questions on, that’ll be a major change from what we’ve had in the past. And that’ll be welcomed by our party,” Bucco said.
This story has been updated with more information.
