Throughout the budget process — from Governor Murphy's proposal to the public hearings to the revenue projections — one major threat loomed over state lawmakers: the federal reconciliation bill’s cuts to Medicaid, food assistance, and other critical programs. Given their public statements opposing these cuts, the state budget should have been an opportunity to build defenses against these cuts, begin raising revenues from wealthy individuals and corporations, and avoid short-term giveaways.
Instead, the budget process went on autopilot. Leaders cut back revenue increases and dipped deeper into the state's cash reserves, as though there would be no federal cuts at all. As has happened in prior years, new expansions in corporate tax credits sailed through committee hearings while the expensive Stay NJ senior homeowner subsidy was preserved without even modest changes to reduce its overall cost to the state. The budget also continued the unfortunate tradition of using dedicated funds to patch one-year budget gaps, including an expanded raid of the Clean Energy Fund to fund both New Jersey Transit’s general operating expenses and the General Fund.
This budget could and should have been a moment of courage — a governor’s final budget, a legislature that has stated its desire to protect the state’s residents from devastating cuts. But instead, the state’s leaders delayed any preparation for federal cuts until after they had already become law. The difficult decisions will not be easier later.
Below is a short summary of NJPP’s budget priorities and their final status in the Appropriations Act.
NJPP FY26 Budget Priority
Was it included in the Governor’s Budget?
| Protect the surplus and close the deficit |  Partially Included. The projected annual budget shortfall has been reduced from $2.1 billion in the FY 2025 budget bill to $1.5 billion through some tax increases and budget cuts. The budget bill retains cash reserves of nearly $6.8 billion, but still cuts deeper into the reserves to pay basic expenses. |
| Fully fund pensions and schools |
 Yes. The governor and legislature continued the state’s commitment to fully funding pensions and the K-12 school funding formula. |
| Raise revenues to balance the budget |
Partially Included. The final state budget does include increases in revenue, including the increase in fees on property sales over $2 million and increased taxes on online gambling. However, these increases raise less money than the governor’s original proposals, leading to the budget drawing more heavily on cash reserves. |
| Maintain StayNJ’s guardrails, specifically the original spending rules that require a healthy budget surplus |  No. StayNJ, an expensive subsidy program that disproportionately benefits wealthy senior homeowners, requires a 12 percent surplus target before payments can go out. This budget continues to fund StayNJ and assumes payments will go out in 2026, even though the surplus is now well below 12 percent. |
| Maintain funding for services for immigrants | Yes. Thankfully, the proposal preserves funding levels for programs such as Cover All Kids, which provides health insurance for children regardless of immigration status, and legal services for immigrant adults and children. The budget also doubles funding for the Office of New Americans, which connects immigrants to services for which they or their families may be eligible. |
| Expand and improve tax credits for working families |
No. Unfortunately, the final budget included no expansion of the Child Tax Credit or Earned Income Tax Credit to help working families afford the increasing cost of living in the state. |
| Increase benefits in WorkFirst NJ to reduce poverty | No. Similarly, there was no expansion of the benefit amount for WorkFirst NJ, which provides cash assistance to low-income households. |
| Expand affordable health insurance options | Partially Included. As noted above, the budget continued to fund Cover All Kids, dedicating $165 million to the program to keep pace with enrollment. However, there were no other proposals to expand access or eligibility to state-funded health insurance programs. |
| Keep the Corporate Transit Fee funding transit |
Yes. Corporate Transit Fee funds were directed only to New Jersey Transit and not to the general fund or footing the bill for other programs. |
| Use the Clean Energy Fund only for clean energy projects |
No. In fact, lawmakers expanded the raids on the Clean Energy Fund to over $190m to be used for basic New Jersey Transit operations and to the General Fund. |
| End predatory prison communication fees | No. The budget did not include any funding to reduce or eliminate the cost of prison communication fees, leaving families to bear the $15 million burden of communicating with their incarcerated loved ones. |
All citations to the Appropriations Act (A-5800/S-2026) and Scoresheet unless otherwise indicated.
To learn more about policy solutions that NJPP recommends to build a more equitable state, read Blueprint for a Strong and Resilient New Jersey.
