What to Look for in the New Jersey Budget for Fiscal Year 2025

Ahead of Governor Murphy’s budget address, here are eleven ways the next state budget can advance economic justice.

Published on Feb 22, 2024 in Tax and Budget

New Jersey’s state budget can be a powerful tool to reduce income inequality, advance racial equity, and improve the standard of living for working families. This requires investments in areas that boost widespread economic security and opportunity — like strong public schools, affordable health care, and reliable mass transit — supported by a fair tax code that primarily raises revenue from profitable corporations and individuals with the highest incomes and wealth.

The investments made in the state budget are vital to the state’s social and economic health, especially now as many working- and middle-class residents struggle to keep up with rising costs. But with lawmakers touting affordability as their top priority in the State House, working families may see cuts to essential programs or have to pay more in taxes, fares, and fees to make up for lower-than-expected revenue collections and a newly enacted $1 billion corporate tax cut.

Without additional federal pandemic aid to draw from, Governor Murphy and legislative leaders have a choice. They can either balance the next state budget on the backs of families who need the most help or require the wealthiest individuals and most profitable corporations to contribute more toward the public investments that helped fuel their success.

Ahead of Governor Murphy’s budget address for Fiscal Year (FY) 2025, NJPP has identified the following key benchmarks and priorities to evaluate whether the next state budget sufficiently advances economic, social, and racial justice.

Overall Fiscal Health

Bring Back the Corporate Surcharge on Big Businesses
New Jersey is set to lose $1 billion in annual revenue after state lawmakers allowed the Corporation Business Tax surcharge to expire on January 1. This tax cut will make it difficult for lawmakers to balance the state budget as-is, let alone one with any new or expanded programs aimed at boosting affordability. Since the corporate surcharge is only paid by the most profitable corporations in the world — including multinational corporations headquartered outside of New Jersey — lawmakers should bring back this targeted 2.5 percent tax to balance the state budget without raising costs for low- and middle-income households.

Fully Fund Pensions and Schools
Beyond the inherent value that pensions and public schools provide to retirees and students, respectively, New Jersey’s long-term fiscal health improves when the state fully funds its major obligations. After years of skipped pension payments and underfunding the school funding formula — culminating in 11 credit downgrades during the Christie administration alone — Governor Murphy has reversed course, and the state has seen its credit rating upgraded multiple times as a result. Higher credit ratings result in lower interest rates when borrowing and paying off debt, providing savings to the state and taxpayers alike. To keep up this momentum, lawmakers should make another full pension payment and continue ramping up state aid for public schools.

Maintain a Healthy Surplus
A healthy surplus allows the state to weather difficult economic conditions, such as a recession, without resorting to drastic budget cuts when tax collections come in lower than expected. In the past, New Jersey failed to maintain a robust surplus, leaving the state unprepared at the onset of the pandemic. At the start of the current fiscal year, New Jersey had a surplus of roughly $8 billion, which should be maintained, at a minimum. Raiding the surplus, as some lawmakers have suggested, would do nothing to fix the state’s long-term structural deficits and leave the state vulnerable during the next economic downturn.

Family Affordability

Expand and Improve Tax Credits for Working Families
New Jersey has two notable tax credit programs designed to put money back in the pockets of low- and middle-class families across the state: the Child Tax Credit (CTC) and the Earned Income Tax Credit (EITC). Together, these tax credits provide targeted, direct assistance to workers and families who often spend that money immediately in their local communities, providing a broader economic benefit. Expanding the eligibility and benefit levels of these credits would go a long way toward the governor’s goal of making New Jersey the best place to raise a family. Specifically, the CTC should be expanded to include children up to age 12, and the EITC should include taxpayers who file with an Individual Tax Identification Number (ITIN).

Increase Benefits in WorkFirst NJ to Reduce Poverty
To make New Jersey affordable for everyone, the state should prioritize the lowest-income families who have the hardest time keeping up with the rising cost of living. Yet WorkFirst NJ, the state’s temporary assistance program targeted to residents with the lowest incomes, has not kept up with inflation and has a benefit amount well below the poverty line. The benefit level in WorkFirst NJ should increase to reflect the actual cost of living rather than an outdated, insufficient number.

Health Care

Expand Affordable Health Insurance Options
New Jersey has successfully reduced the uninsured rate for children through the Cover All Kids program, which expanded NJ FamilyCare to all income-eligible kids, regardless of immigration status. However, thousands of children still lack coverage because their families do not qualify for Medicaid and are barred from accessing the state marketplace, GetCovered NJ, even at full price. The budget should eliminate these barriers to affordable health coverage by creating a buy-in option for NJ FamilyCare plans and opening the marketplace and its state subsidies to all residents, regardless of immigration status.

Increase Outreach for NJ FamilyCare
The end of pandemic-related health coverage expansions has forced more than 360,000 New Jersey residents to lose their coverage, with more than 3 in 4 losing their insurance for procedural reasons alone. The state has invested in outreach to reduce the number of eligible residents being disenrolled, but state funding must increase to prevent more families from losing their health insurance.

Continue to Fund Harm Reduction Expansion
Harm reduction centers have been shown to prevent overdose deaths, which account for more than 3,000 deaths annually. By providing critical resources such as naloxone and safe-use supplies, harm reduction centers save lives and connect people who use drugs to the care and support they need. However, as the state looks to double the number of harm reduction centers after decades of disinvestment, additional funding will be required to meet increased demand and further reduce overdose deaths.

Environment and Transit

Fully Fund NJ Transit to Avoid Drastic Fare Hikes
NJ Transit plays a vital role in the daily lives of commuters and the state’s broader economy. However, the agency’s future is in jeopardy with a $200 million budget shortfall that will grow to $1 billion next fiscal year. To cover this year’s deficit, the agency proposed a 15 percent fare increase, but this will not solve the structural issue behind the agency’s financial woes: a lack of sufficient dedicated state funding. Fare increases also function as a regressive tax on working-class commuters and have been shown to reduce ridership. NJ Transit desperately needs sustained, dedicated state aid, as NJPP identified in a report last year. Without a plan to use progressive sources that tax those with the most wealth, the state runs the risk of drastic service cuts and fare hikes.

Use the Clean Energy Fund on Clean Energy
For the last decade, money dedicated to clean energy has been diverted to NJ Transit to pay for basic maintenance instead of its intended purpose of promoting the use of clean energy. If lawmakers continue to divert money from the Clean Energy Fund to NJ Transit, the budget should include specific language to ensure these dollars are used to transition the agency’s buses, trains, and buildings to green energy and zero emissions.

Criminal Legal System

Eliminate the Cost of Communication for People Incarcerated
Last year, New Jersey took a monumental step in addressing the hardship of fines and fees in the criminal legal system by eliminating public defender fees. The state budget should continue to reduce these hardships by addressing the exorbitant cost of prison communication. The families of people who are incarcerated must pay private contractors for phone and video calls with their loved ones, and a short conversation can cost more than a day’s pay for people in state facilities. Communication with family can reduce recidivism and help those incarcerated maintain ties with their community. The state budget should cover these costs, as other states do, and ensure meaningful access to phone and video services.