Category: Report

Medicaid Work Requirements: Barriers by Design

Posted on by Brittany Holom-Trundy

Everyone deserves access to affordable health care, and Medicaid, the joint federal and state-run health insurance program for people with low incomes and other barriers to coverage, serves as an essential source of that coverage. Yet new federally mandated work requirements threaten to rip that coverage away with increased obstacles to eligibility along with burdensome paperwork and reporting requirements. The impending catastrophic loss of coverage will undermine residents’ health, as uninsured residents are more likely to delay or go without needed medical care because they can no longer afford it.[1]

Instead of creating unnecessary barriers to care, policymakers should protect and strengthen Medicaid by making it easier for eligible residents to enroll in and keep their coverage. As New Jersey state leaders implement the new work requirements, they must incorporate community input and build safety net mechanisms that address the reality of residents’ barriers to Medicaid coverage.

To minimize coverage losses, this report recommends:

  • building a statewide outreach and enrollment support network;
  • providing clear and consistent guidance and simple ways to submit and track documentation;
  • prioritizing utilizing existing administrative data and self-attestation to reduce unnecessary paperwork;
  • and continuing health care coverage through a Medicaid bridge program.

 

Many Medicaid Members Must Soon Meet New Work Requirements

Mandating work activities in order to enroll in or keep Medicaid coverage threatens low-income residents’ access to health care. While there are a few different ways to meet the requirements, this additional barrier to health coverage counteracts the program’s purpose of providing insurance to those who need it most.

Work requirements, also called “community engagement requirements,” direct Medicaid applicants and enrollees to prove through documentation that they are working, looking for work, attending school, volunteering, or participating in other qualifying activities.[2] Medicaid is a health insurance program for people who cannot work or cannot get coverage through their job. Because of this, work requirements have not historically applied to the program. Still, similar requirements apply to other means-tested programs, such as the Supplemental Nutrition Assistance Program (SNAP) and the Temporary Assistance for Needy Families (TANF) program.[3] Congress changed this longstanding policy in 2025, when it passed H.R. 1, also known as the “One Big Beautiful Bill Act.” The new law establishes nationwide work requirements for Medicaid beginning January 1, 2027.[4]

The new rules apply to the Medicaid expansion population: adults with income up to 138 percent of the federal poverty level. This includes many adults without dependents, who were ineligible prior to the expansion.[5] These enrollees must complete 80 hours per month of a qualifying activity, or document income equal to or greater than 80 hours at the federal minimum wage per month ($580/month in 2026). Residents must prove they meet the requirements when applying for coverage. Current enrollees must prove it again every six months, when the State renews their Medicaid eligibility.[6] This increase from once-a-year renewals adds a new administrative burden for Medicaid expansion enrollees.[7]

Medicaid Enrollees Must Meet Work Requirements Through Approved Activities

Some groups, such as people enrolled in traditional Medicaid and people enrolled through the Aged, Blind, Disabled (ABD) program, do not have to meet the new work requirements because they are not a part of the Medicaid expansion enrollment group. Other enrollees, such as parents/caregivers of children under 14 years old, pregnant people, and those with serious medical conditions, may need to provide documentation to prove that they do not need to meet those requirements.[8]

Whether subject to the work requirements or not, eligible residents may still lose coverage if they cannot manage complex reporting and documentation requirements, creating administrative barriers to accessing care. Previous states’ attempts at imposing work requirements for Medicaid have resulted in loss of coverage; for example, Arkansas’ program that ran from June 2018 to March 2019 resulted in more than 18,000 people losing coverage, largely because they did not complete the required reporting and documentation.[9] Since July 2023, Georgia has included work requirements in their Pathways program, but is finding significant under-enrollment attributed to a cumbersome enrollment process and restrictive eligibility criteria.[10]

The Garden State has seen similar harmful effects when more administrative tape has been introduced to critical safety net programs. The challenges of communication and documentation during the recent “Medicaid unwinding,” or removal of COVID-19 pandemic protections, in New Jersey resulted in more than 490,000 people losing coverage simply due to technical barriers.[11] Nearly three-quarters of Medicaid members in New Jersey who were disenrolled during unwinding were terminated for procedural reasons.[12] These types of losses worsen racial disparities in coverage, as Black and Hispanic/Latinx enrollees are most likely to face occupational, physical, and other obstacles in completing paperwork processes.[13] The introduction of work requirements will result in similar types of administrative challenges and loss of coverage.

Work Requirements Harm All Enrollees

Policies that set standards of which people are “worthy” of health care coverage inherently create barriers that will have far-reaching effects beyond the targeted groups.[14] They do this simply by making it harder to get and keep coverage — both for those who must meet the new requirement and those who have to prove that they do not need to meet it.

Evidence from previous state experiences and national research shows that Medicaid work requirements do not encourage employment as proponents suggest, but instead create administrative barriers that cause eligible people to lose health coverage.[15] In New Jersey, the new requirements are expected to increase paperwork for both residents subject to the requirements and those who have to prove that the requirements do not apply to them, leading to unnecessary coverage losses, a higher uninsured rate, and increased costs for the state’s health care system.[16] With around 540,000 participants in New Jersey’s Medicaid expansion population, hundreds of thousands of people will face these new barriers to keeping their coverage.[17]

Documenting Work Requirements Requires Overcoming Numerous Barriers

Coverage losses are expected to occur not because people fail to meet the work requirements, but because they cannot manage complex and more frequent reporting and documentation rules, or run into technical and administrative problems. National evidence shows that most adults under 65 who are enrolled in Medicaid (64 percent) are already working full or part time.[18] Yet the tasks for documenting work requirements can be especially hard for people with variable work schedules, non-traditional or varied employment and work activity arrangements, limited internet access, language barriers, or frequent address changes.[19]

In New Jersey, residents applying for NJ FamilyCare — the state’s Medicaid and Children’s Health Insurance Program (CHIP) — can apply in person at a County Social Service Agency, by phone, online or by paper application, or may be referred to Medicaid after applying for marketplace coverage through GetCoveredNJ.[20] For some members, renewal forms must also be submitted to verify continued Medicaid eligibility. Changes in federal law have increased those renewals from once a year to every six months for Medicaid expansion participants.[21] The multi-page paperwork has traditionally required extensive personal information, including Social Security numbers or other identification numbers for immigrants, as well as employer and income information.[22] These identification numbers have been used to verify income levels and other eligibility information. Notably, residents have not had to specify how many hours they regularly work to earn income.

Once the work requirements are imposed, some residents who qualify through the Medicaid expansion but do not meet the $580/month minimum income threshold will have to provide documentation of the hours worked. Generally, this will require supervisors to provide an employee, trainee, or volunteer with specific forms listing the hours worked and the income earned for each month. Then, the employee must upload or mail those documents. If the State cannot verify that an enrollee meets work reporting rules through available electronic data, the State must issue a formal notice of noncompliance and allow 30 days for enrollees to show that they are compliant or that an exemption applies to them.[23]

This process reveals a variety of barriers for residents trying to document their work hours to obtain or keep their coverage:

Language Barrier: While many state forms are available in other languages, it can still be difficult to use the system to reach those forms or get questions answered for people whose primary language is not English. With health care forms requiring technical information that can be difficult for even an English-language speaker to understand, applicants who speak English as a second language are more likely to struggle understanding them.

Technological Barrier: While there is a Medicaid application portal available online, many residents still face a barrier in using online forms either because they struggle with technology more broadly (such as older adults or people with disabilities) or do not have easy access to computers or the internet at home. Additionally, many people in underserved communities only access the internet on a mobile phone, or rely on their phone as their primary way online, and state applications and resources are not always mobile-friendly.[24]

Information Barrier: Understanding what documentation is needed for the work requirements also requires a Medicaid member to understand what eligibility group they are a part of for their Medicaid coverage. For example, to know if they are a Medicaid expansion participant, a member would have to look for the plan name of “ABP” (Alternative Benefit Plan) on their health insurance card.[25] This information can be difficult for residents to understand or find, creating another barrier to getting the help they need.

Supervisor Barrier: Gathering the required documents from supervisors can be difficult for participants who meet work requirements through 80 or more hours of qualifying work, community service, training, or educational enrollment. This is especially challenging where participants have multiple jobs or activities, temporary or seasonal jobs, or other non-traditional types of employment.

Transportation Barrier: Participants must find a way to gather and submit their documents. If they cannot do so online because of limited internet access or other technological barriers, then they have to physically collect and submit their forms and documentation. This requires transportation to the post office, a County Social Service Agency, and potentially to their supervisor at a non-work time.

Time Barrier: Every step in the application process takes time, from gathering records and documentation from a supervisor or other source to submitting them. Filling out forms, collecting documents, and submitting them all require applicants and enrollees to commit hours of their day to the process. Waiting for documentation or approval can delay the
process further.

Documenting Needed Hours Requires Reliable Supervisors and Overcoming Time and Transportation Barriers.

Residents Seeking Exceptions to Work Requirements Face Additional Challenges

While many people will have to meet the work requirements, some will not, because they fall into certain enrollee categories named in the law. But they can still lose coverage if they cannot successfully document their status. The State will use administrative data to automatically verify that status for some residents, but others will need various additional forms of documentation to be waived from work requirements.[26]

Certain Medicaid Enrollees Will Not Have to Meet Work Requirements

Obtaining and maintaining a documented status that waives the requirements often involves submitting paperwork, medical documentation, or other proof to the state on an ongoing basis. “Medically frail” individuals, including people with disabilities and serious medical conditions, may have to provide documentation to verify their medical condition, as well as show that it prevents them from working.[27] H.R. 1 also limits states’ ability to accept self-attestation, the practice of allowing Medicaid applicants or enrollees to certify that they qualify for an exception without submitting additional documentation.[28] These administrative requirements create additional ways for eligible residents to lose coverage because of paperwork burdens, processing delays, or confusion about the reporting process.

“Medically frail” enrollees, in particular, will face significant additional challenges on top of the previously mentioned barriers. Obtaining the documentation needed to qualify for this status and confirm that work requirements do not apply raises the following barriers:[29]

Accessibility Barrier: Medically frail individuals may face mobility limitations, limited access to specialized providers, and long wait times for appointments. Cognitive or functional limitations may also make it difficult to understand notices, schedule appointments, complete forms, gather records, or submit documentation by required deadlines.

Medical Records Barrier: People with multiple or complex conditions often receive care from several providers and health systems. Their medical records may not clearly capture the full extent of their functional limitations, requiring them to coordinate across providers to obtain documentation.

Provider Capacity Barrier: Providers must understand the exemption criteria, determine whether patients qualify, and complete additional forms. In already overburdened health care practices, this additional administrative work could delay documentation or discourage providers from completing forms altogether.

Complexities Barrier: For medically frail individuals, the steps needed to obtain and submit documentation can take significant time and may be difficult to complete within a short redetermination window. Extended processes can create growing physical challenges for people with certain medical conditions. Strict deadlines could cause eligible residents to lose coverage simply because they could not finish the documentation process in time.

Documenting Medical Statuses Requires Overcoming Significant Additional Barriers 

Losing Coverage Raises Health Care Costs and Worsens Public Health

When more New Jerseyans are uninsured, worsening public health and increasing costs harm communities across the state. The new Medicaid work requirements could result in significant coverage losses in New Jersey, even among people who remain eligible for the program. Nationwide, millions of people are at risk of losing Medicaid coverage, with researchers predicting 7.1 million people will lose Medicaid coverage and become uninsured.[30] In New Jersey, of the 540,000 adults included in the Medicaid expansion population, 300,000 could lose coverage.[31] This loss of coverage could cause an annual increase of approximately $669 million in uncompensated care costs, placing additional strain on New Jersey’s Charity Care system.[32]

Losing Coverage Worsens Health Outcomes

Residents who lose eligibility due to the work requirements are likely to become uninsured because there is no safety net program providing temporary coverage for those who lose Medicaid coverage. Having more uninsured residents will likely lead to a decrease in preventive care and increase in emergency room visits.[33] Because people without coverage are more likely to delay preventive care, forgo treatment, and rely on emergency departments for conditions that could have been addressed earlier, they often experience poorer health outcomes.[34]

New Jersey’s experience during the COVID-19 pandemic demonstrated the importance of maintaining access to health coverage during a public health crisis. In the first months of the pandemic, an estimated 124,000 New Jerseyans lost access to employer-sponsored insurance after losing their jobs and were unable to obtain other coverage.[35] This brought the state’s uninsured population to approximately 701,000 non-elderly adults, or 13 percent, by May 2020. This crisis temporarily pushed the uninsured rate back to pre-Affordable Care Act levels, erasing years of progress.[36] Changes introduced through the Affordable Care Act, like the Medicaid expansion, helped to keep the crisis from escalating further.[37] At the same time, New Jersey hospitals faced increased pressure to provide care to uninsured residents, prompting the State to provide additional funding to help hospitals cover uncompensated care.[38]

Threats to public health programs, especially Medicaid coverage, also worsen racial disparities in health coverage and outcomes. The effects of historical racism mean that differences in access to care across communities in New Jersey persist.[39] Increased barriers to completing procedural requirements, like those seen during the removal of COVID-19 coverage protections, can worsen these differences by causing people to lose health coverage.[40] Increasingly higher uninsured rates mean that, during a crisis, the harms for Black, Hispanic/Latinx, and other communities who are more likely to be uninsured are magnified.[41]

New Jersey’s challenges during and after the pandemic underscored how quickly coverage losses can translate into broader challenges for residents’ access to care and the health care system’s ability to meet their needs.

More Uninsured Residents Destabilizes the Health Care System

Coverage losses also carry significant financial consequences for New Jersey’s health care system. Because uninsured residents often delay care until an illness has become further advanced and are then more likely to seek care through emergency rooms, the demands on a health care system become less predictable and more unstable.[42] Health care providers must absorb increasing uncompensated care costs while simultaneously losing the payments that would have come if these same patients were covered by Medicaid. This imbalance of funding could lead to health care system cuts and more limited availability of services.[43]

Before the Affordable Care Act’s Medicaid expansion, hospitals provided substantially more uncompensated care to uninsured patients. As Medicaid coverage expanded and the uninsured rate declined, uncompensated care costs fell, reducing pressure on hospitals and the State’s Charity Care program, which helps hospitals cover the cost of care provided to eligible uninsured and underinsured patients.[44]

Reversing the coverage gains from the ACA by imposing work requirements will shift greater health care costs to providers, the State, and other residents.[45] Assuming predictable health care cost inflation and considering previous estimates for the needed care for uninsured individuals, an increase of 300,000 more uninsured residents in New Jersey may require the State to devote around $669 million more each year to help hospitals fill the gap and absorb the cost of care provided to newly uninsured residents.[46] These catastrophic harms grow even larger when factoring in the projected $2.6 billion in other H.R. 1 cuts to provider payments and approximately $3 billion in surrendered federal matching dollars due to these enrollment losses.[47]

Recommendations

As the federal government adds more hurdles to health care coverage, it becomes increasingly urgent for state governments to proactively protect their residents. By taking actions to work around those hurdles and ease the process of getting and keeping coverage, state leaders can keep New Jerseyans healthy and thriving. These same actions can also ensure that losing one type of coverage does not immediately devastate a resident or family.

The following recommendations offer some first, clear steps toward protecting residents and their health care:

Build a Statewide Outreach and Enrollment Support Network

New Jersey should build on its existing stakeholder outreach, including its partnership with the New Jersey Health Care Quality Institute, to launch a statewide effort that reaches Medicaid members through every available channel to help them understand the new requirements and how to comply.[48] This should include coordinated outreach through health care providers and health systems, managed care organizations, state agencies, faith-based organizations, community groups, public messaging, and social media. The State should also provide funding, training, and other support to county boards and community organizations, including the State Navigators, that help residents apply for coverage and submit documentation. This would enable them to offer extended hours, evening and weekend appointments, and in-person assistance for people who may have difficulty completing these processes on their own.

Provide Clear, Consistent Guidance and Simple Ways to Submit and Track Documentation

The State should establish clear and uniform guidance explaining how members can document work requirements and demonstrate that they qualify for statuses that waive the requirements, particularly medical frailty. For medical frailty, the State should develop a standardized, simple provider form that minimizes the information health care providers must supply and reduces unnecessary paperwork. For tracking hours, the State should provide simple, uniform forms for recording volunteer and work hours and other necessary information.

New Jersey should also improve its online systems so that members can submit documentation and quickly check their application and eligibility status, including whether they are subject to the work requirements. Streamlining the Medicaid application process with other resident-serving online portals such as GetCoveredNJ would enable immediate eligibility determinations so people seeking health care could access all their coverage options in one place. Clear, consistent guidance and accessible tools will help prevent confusion and reduce the risk that eligible residents lose coverage because they do not understand what is required of them.

Prioritize Administrative Data and Self-Attestation to Reduce Unnecessary Paperwork

New Jersey should build on its ongoing efforts to integrate data across state and county systems and maximize the use of administrative data and self-attestation to verify eligibility and exemptions before requiring members to submit additional documentation. This is consistent with federal H.R. 1 implementation guidance that requires states to use data whenever possible to verify Medicaid eligibility.[49] The State is already developing systems to connect information from Medicaid claims, Social Security, SNAP and TANF, education, wage, and other data sources, with the goal of automatically identifying members who are exempt from or compliant with work requirements.[50] By continuing to expand these data connections and improving how they support automatic eligibility determinations, the State can avoid unnecessarily asking members it can already verify to complete renewal packets or provide additional proof.

New Jersey leaders have indicated that they will prioritize self-attestation whenever permitted in 2027.[51] The State should build on this commitment by making self-attestation the standard pathway whenever administrative data cannot verify an exemption or qualifying activity, rather than requiring third-party documentation. Member notices and renewal materials should clearly explain when self-attestation is available, what information members are being asked to certify, and what they should do if they cannot self-attest. This approach would reduce unnecessary paperwork and make it easier for eligible residents to maintain coverage, while allowing the State to use existing data and other verification tools to identify eligibility and prevent improper enrollment.

Continue Health Care Coverage through a Medicaid Bridge Program

New Jersey should establish a state-funded bridge coverage program for Medicaid members who lose coverage because they fail to meet the new work reporting requirements. Rather than these residents becoming immediately uninsured, the State could provide temporary coverage while residents resolve their compliance issues, appeal a termination, or transition to another affordable coverage option. Some states have created a bridge program for people who lose Medicaid coverage because of income ineligibility or have transitioned them directly to state-based exchange coverage.[52] While H.R. 1 rules prevent the state from seamlessly transitioning people to subsidized marketplace coverage, a bridge program would keep people insured while they figure out alternative coverage options.[53] This approach would help prevent disruptions in access to care while reducing the risk that administrative barriers turn into prolonged gaps in coverage.

Conclusion

The implementation of H.R. 1 work requirements will create new administrative hurdles for New Jersey residents who rely on Medicaid, making it critical that the State act now to prevent eligible people from losing coverage simply because they cannot navigate a complex process. New Jersey should prioritize clear communication, accessible enrollment assistance, streamlined documentation, self-attestation wherever permitted, and the use of existing administrative data to verify eligibility. With nearly 1.8 million residents relying on NJ FamilyCare for health coverage, the State has an opportunity to build an implementation system that protects coverage while minimizing unnecessary burdens on members and providers.[54] The time to build that system is now, before the new requirements take effect in 2027.

End Notes

[1] Tolbert, J., Cervantes, S., Bell, C., and Damico, A. Key Facts about the Uninsured Population. KFF. Jun. 16, 2026.

[2] Meuse, D. Medicaid Work Reporting Requirements: Implementation Basics and State Decision Points. State Health & Value Strategies. Aug. 15, 2025.
New Jersey Department of Human Services. Division of Medical Assistance and Health Services: Community Engagement/Work Requirements. Accessed Sep. 14, 2026.

[3] Center on Budget and Policy Priorities. Policy Basics: Introduction to Medicaid. Updated Nov. 4, 2025; Guth, M. and Musumeci, MB. “What is the history of Medicaid and work requirements?” in An Overview of Medicaid Work Requirements: What Happened Under the Trump and Biden Administrations? KFF. May 3, 2022; Congressional Budget Office. Work Requirements and Work Supports for Recipients of Means-Tested Benefits. Jun. 2022; Aguas, T. TANF Explained: New Jersey’s Safety Net Steadily Falls Short. New Jersey Policy Perspective. Apr. 21, 2026.

[4] P. L. No. 119-21, 139 Stat. 78. Section 71119.

[5] Spiegel, J. NJ FamilyCare 101: How Medicaid Works in New Jersey. New Jersey Policy Perspective. Sept. 2026; Center for Health Care Strategies. A Summary of Federal Medicaid Work Requirements. Updated Jun. 2026; New Jersey Department of Human Services. MEDICAID COMMUNICATION NO. 26-03. Feb. 26, 2026. In NJ, using 2026 eligibility threshold levels for a family of three, the Medicaid expansion population would include those making from $509/month to $3,142/month. Important Note: the work requirements will apply based on members’ statuses – that is, for members such as children enrolled through New Jersey’s Cover All Kids program, the work requirements will not apply because they are children-only member households. Parents who are not members will not be subject to work requirements just because their children are enrolled.

[6] P. L. No. 119-21, 139 Stat. 77. Section 71107.

[7] Seraf, K. and Dervan, E. New CMS Guidance on Six-Month Renewals in Medicaid. State Health & Value Strategies. Mar. 12, 2026.

[8] Center for Health Care Strategies. A Summary of Federal Medicaid Work Requirements. Updated June 2026.

[9] Hinton, E. and Rudowitz, R. 5 Key Facts About Medicaid Work Requirements. KFF. Feb. 18, 2025.

[10] Chan, L. Georgia’s Pathways to Coverage Program: The First Year in Review. Georgia Budget & Policy Institute. Oct. 29, 2024.

[11] New Jersey Department of Human Services. Medicaid Monthly Renewal Report: June 2024 Report. p. 6. Jun. 2024.

[12] United States Government Accountability Office. Medicaid and Children’s Health Insurance: Disenrollments After COVID-19 Varied Across States and Populations. Jun. 2025. p. 35.

[13] Rumalla, K.C., Nelson, D.B., McConnell, K.J., and Zhu, J.M. Racial and Ethnic Disparities in Medicaid Disenrollment After the End of the COVID-19 Public Health Emergency. JAMA Internal Medicine. vol 184, no. 8. Jun. 3, 2024. pp. 987-989.

[14] For a discussion of the concept of “worthiness” or “deservingness” and its role in people’s opinions about work requirements, see: Haeder, S.F., Sylvester, S.M., and Callaghan, T. “Lingering Legacies: Public Attitudes about Medicaid Beneficiaries and Work Requirements.” Journal of Health Politics, Policy and Law. vol. 46, no. 2. Apr. 1, 2021. pp. 305-355.

[15] Guth, M. and Musumeci, MB. “What is the history of Medicaid and work requirements?” in An Overview of Medicaid Work Requirements: What Happened Under the Trump and Biden Administrations? KFF. May 3, 2022; Haeder, S.F., Sylvester, S.M., and Callaghan, T. “Lingering Legacies: Public Attitudes about Medicaid Beneficiaries and Work Requirements.” Journal of Health Politics, Policy and Law. vol. 46, no. 2. Apr. 1, 2021. pp. 305-355; Lukens, G. and Zhang, E. Medicaid Work Requirements Could Put 36 Million People at Risk of Losing Health Coverage. Center for Budget and Policy Priorities. Feb. 5, 2025; Musumeci, M. Disability and Technical Issues Were Key Barriers to Meeting Arkansas’ Medicaid Work and Reporting Requirements in 2018. KFF. Jun. 11, 2019.

[16] New Jersey Department of Human Services. New Jersey Calls on CMS to Simplify Medicaid Community Engagement Requirements to Protect Health Coverage. Press Releases 2026. Aug. 17, 2026; Spiegel, J. Proposed Medicaid Work Rule Puts Coverage for the Medically Frail at Risk. New Jersey Policy Perspective. Jul. 30, 2026.

[17] New Jersey Department of Human Services. Key Direct Impacts of H.R. 1: New Jersey. May 2026.

[18] Hinton, E. and Rudowitz, R. 5 Key Facts About Medicaid Work Requirements. KFF. Feb. 18, 2025.

[19] Wagner, J. Falling Through the Cracks: Major Gaps in Medicaid Work Requirement Policy. Center for Budget and Policy Priorities. Jul. 29, 2026; Brower, C. How Some Medicaid Work Requirements Hurt Freelancers and Gig Workers. HR Executive. Aug. 4, 2025.

[20] New Jersey Department of Human Services. Division of Medical Assistance and Health Services: NJ FamilyCare/Medicaid. Accessed Sep. 3, 2026; New Jersey Department of Human Services. NJ FamilyCare Application. 2026. Accessed Sep. 3, 2026; New Jersey Department of Banking and Insurance. GetCoveredNJ: NJ FamilyCare. Accessed Sep. 3, 2026.

[21] Meuse, D. Medicaid Work Reporting Requirements: Implementation Basics and State Decision Points. State Health & Value Strategies. Aug. 15, 2025.

[22] New Jersey Department of Human Services. NJ FamilyCare Application. 2026. Accessed Sep. 3, 2026.

[23] U.S. Department of Health and Human Services – Centers for Medicare & Medicaid Services. Medicaid Program; Community Engagement Requirement for Certain Individuals. Federal Register, vol. 91, no. 106. pp. FR 33348-33482. File Code CMS-2454-IFC. Jun. 3, 2026.

[24] Pew Research Center. Mobile Fact Sheet. Nov. 20, 2025.

[25] New Jersey Department of Human Services. Division of Medical Assistance and Health Services: Overview of Federal Changes to NJ FamilyCare/Medicaid. Jun. 22, 2026.

[26] New Jersey Department of Human Services. Division of Medical Assistance and Health Services: Overview of Federal Changes to NJ FamilyCare/Medicaid. Jun. 22, 2026; Meuse, D. Medicaid Work Reporting Requirements: Implementation Basics and State Decision Points. State Health & Value Strategies. Aug. 15, 2025.

[27] New Jersey Department of Human Services. Comments on ‘Medicaid Program; Community Engagement Requirement for Certain Individuals. Regulations.gov, Public comment. Jul. 31, 2026.

[28] Manatt Health. CMS Releases Interim Final Rule on Medicaid Work Reporting Requirements. State Health & Value Strategies. Jun. 15, 2026.

[29] Swenson, A. Too sick to work, but can they prove it? New Medicaid rule worries patients. AP News. Jun. 11, 2026; Whitehead, S. Doctors ‘Cringe’ at Possibility of Documenting Which Medicaid Enrollees Too Sick To Work. KFF News. Jul. 20, 2026.

[30] Lukens, G. and Zhang, E. Medicaid Work Requirements Will take Away Coverage From Millions: State and Congressional District Estimates. Center for Budget and Policy Priorities. Jul. 22, 2025.

[31] New Jersey Department of Human Services. Key Direct Impacts of H.R. 1: New Jersey. May 2026.

[32] Calculated using the estimated annual cost of $2,230 per uninsured individual in 2030 multiplied by the projected 300,000 current Medicaid enrollees who will lose coverage due to work requirements. NJPP analysis using dollar estimates and methods from Argüello, A. and Ducas, A. New CBO Estimates Confirm Massive Rise in Uncompensated Care Costs Under One Big Beautiful Bill Act. Center for American Progress. Jun. 10, 2025.

[33] Abelson, R. Uninsured Patients Rise Sharply, Hospitals Report, Citing Obamacare Cuts. New York Times. Jul. 30, 2026; Oguntuase, F., Uzzi, C., Okahia, T., Adetifa, O., Eziechi, C., Okobi, O., Nwoagbe, O., and Dare, O. Relationship Between Health Insurance Status and Frequency of Routine Medical Checkups. Cureus. vol. 17, no. 7. Jul. 13, 2025. p. e87847; DeVoe, S., Roberts, L., Davis, W., and Wallace-Brodeur, R. Identifying Barriers to Access and Utilization of Preventive Health-Care Services by Young Adults in Vermont. Journal of Adolescent Health. vol. 62, no. 6. 2018. pp. 674-680.

[34] Tolbert, J., Cervantes, S., Bell, C., and Damico, A. Key Facts about the Uninsured Population. KFF. Jun. 16, 2026.

[35] Holom-Trundy, B. COVID-19 Job Loss Leaves More Than 100,000 New Jerseyans Uninsured. New Jersey Policy Perspective. Aug. 6, 2020.

[36] Holom-Trundy, B. Mind the Gap: Keeping New Jerseyans Covered in the Face of Federal Cuts. New Jersey Policy Perspective. Feb. 6, 2026.

[37] Holom-Trundy, B. COVID-19 Job Loss Leaves More Than 100,000 New Jerseyans Uninsured. New Jersey Policy Perspective. Aug. 6, 2020.

[38] New Jersey Department of Health. Murphy Administration Provides $731 Million in Funding for New Jersey’s Hospitals. Press Releases 2021. Apr. 6, 2021.

[39] Holom-Trundy, B. Mind the Gap: Keeping New Jerseyans Covered in the Face of Federal Cuts. New Jersey Policy Perspective. Feb. 6, 2026.

[40] Rumalla, K.C., Nelson, D.B., McConnell, K.J., and Zhu, J.M. Racial and Ethnic Disparities in Medicaid Disenrollment After the End of the COVID-19 Public Health Emergency. JAMA Internal Medicine. Jun. 3, 2024. vol 184, no. 8. pp. 987-989.

[41] Holom-Trundy, B. Unprecedented and Unequal: Racial Inequities in the COVID-19 Pandemic. New Jersey Policy Perspective. Oct. 14, 2020.

[42] Tolbert, J., Cervantes, S., Bell, C., and Damico, A. Key Facts about the Uninsured Population. KFF. Jun. 16, 2026; Association of American Medical Colleges (AAMC). Proposed Cuts to Medicaid Would Harm Patients and Hospitals. Accessed Sep. 3, 2026.

[43] Blavin, F., Buettgens, M., and Simpson, M. Health Care Providers Would Experience Significant Revenue Losses and Uncompensated Care Increases in the Face of Reduced Federal Support for Medicaid Expansion. Urban Institute. Mar. 11, 2025.

[44]Schubel, J. and Broaddus, M. Uncompensated Care Costs Fell in Nearly Every State as ACA’s Major Coverage Provisions Took Effect. Center for Budget and Policy Priorities. May 23, 2018; New Jersey Department of Health. Office of Health Care Financing: Hospital Care Payment Assistance Program (Charity Care) Unit Overview. Accessed Sep. 3, 2026; New Jersey Department of Health – Office of Health Care Financing. Calendar Year 2024: Documented Charity Care Report. 2026. Accessed Sep. 3, 2026.

[45] Bennett, C. New Jersey is Staring into a Healthcare Fiscal Abyss. New Jersey Monitor. May 20, 2026.

[46] Calculated using the estimated annual cost of $2,230 per uninsured individual in 2030 multiplied by the projected 300,000 current Medicaid enrollees who will lose coverage due to work requirements. NJPP analysis using dollar estimates and methods from Argüello, A. and Ducas, A. New CBO Estimates Confirm Massive Rise in Uncompensated Care Costs Under One Big Beautiful Bill Act. Center for American Progress. Jun. 10, 2025.

[47] New Jersey Department of Human Services. Key Direct Impacts of H.R. 1: New Jersey. May 2026.

[48] New Jersey Department of Human Services. Meeting of the Medical Assistance Advisory Council: July 22, 2026. p. 43.

[49]U.S. Department of Health and Human Services – Centers for Medicare & Medicaid Services. Medicaid Program; Community Engagement Requirement for Certain Individuals. Federal Register, vol. 91, no. 106. pp. FR 33348-33482. File Code CMS-2454-IFC. Jun. 3, 2026; Manatt Health. CMS Releases Interim Final Rule on Medicaid Work Reporting Requirements. State Health & Value Strategies. Jun. 15, 2026.

[50] New Jersey Department of Human Services. Meeting of the Medical Assistance Advisory Council: April 22, 2026. p. 19.

[51] NJPP Communication with NJ Department of Human Services staff. Records on file with the authors.

[52] Oregon Health Authority. Oregon Health Plan (OHP) Bridge. Accessed Sep. 2, 2026; Murphy, N. and Millender, S. How States Can Build Bridges by Smoothing Medicaid-to-Marketplace Coverage Transitions. Center for American Progress. Feb. 14, 2023.

[53] Center on Budget and Policy Priorities. Key Facts: Medicaid Work Requirements and Six-Month Redeterminations. Health Reform: Beyond the Basics Project. Jun. 2026. p. 6.

[54] Spiegel, J. NJ FamilyCare 101: How Medicaid Works in New Jersey. New Jersey Policy Perspective. Sep. 2026.

A Solid First Budget, but New Jersey Still Needs Revenue That Lasts

Posted on by Tonanziht Aguas

Gov. Sherrill’s first budget for Fiscal Year (FY) 2027 largely followed through on the promises made in her original address, focusing on reducing the deficit while preserving family affordability. But a closer look shows that robust revenues and reforms are needed to put the state on more stable fiscal footing. Even bigger changes will be needed in FY 2028 to meet the governor’s promise to eliminate the deficit entirely and make the state more affordable for its residents.

The budget prioritizes investments that help New Jersey families and meet the state’s obligations to its residents, including full pension and school formula funding, expansion of the Child Tax Credit to help hundreds of thousands of families, and increased funding for legal services for New Jerseyans at risk of deportation or detention. Reducing the deficit by reforming the senior property tax program Stay NJ and closing tax loopholes used by large businesses and their owners allowed the state to preserve funding for critical programs such as schools and New Jersey Transit. In particular, paring back Stay NJ showed how strict the budget math is; no matter how popular a program or how powerful its supporters, the reality of the state’s revenue shortfall cannot be escaped.

The current budget does not make future budget math easier. The revenue from some of the reforms is only temporary and may be unpredictable. For example, the temporary suspension of businesses taking net-operating-loss deductions is projected to generate $485 million in FY 2027. But this suspension only lasts four tax years, allowing companies to claim those losses in later years, canceling out the benefit of the suspended years with more losses in later ones. Similarly, the fee on employers with Medicaid-enrolled employees may raise around $150 million in FY 2027, but the Office of Legislative Services only projects $23 million in FY 2028, due to a legal change in July 2027 that exempts new, part-time, and seasonal workers from the fee. Employers may also respond by classifying employees as part-time or by enrolling more employees in employer-based insurance, thus reducing the revenue generated. (More on NJPP’s analysis of the Medicaid fee can be found here.)

On the spending side, many of the reduced expenditures between the governor’s March budget proposal and the final approved June budget came from more than $250 million in reduced Medicaid and public health care spending due to lower enrollment. Although reduced enrollment temporarily cuts state spending, an increase in uninsured residents would shift health care costs into other parts of the system, including more hospital charity care and more severe illness. If these severe coverage losses occur, the state has no current plan to cover these residents.

Gov. Sherrill demonstrated her willingness to take on reforms to balance the state’s books and help families seeking economic security. The final version approved by the legislature reflects these principles and values. Those values will be tested soon: the state faces slow-but-steady growth in the face of rapidly rising health care costs, while high-wealth individuals and corporations report record profits. New Jersey’s next budget will require even more work to ensure that a balanced budget comes from fair taxation of the wealthy, rather than cuts to programs that working-class and middle-class New Jerseyans depend on.

Other Major Budget Priorities

Below is a short summary of NJPP’s budget priorities and their final status in the Appropriations Act. (All figures are based on the FY 2027 Appropriations Act unless otherwise noted.)

NJPP FY27 Budget Priority

Was it included in the budget?


Protect the surplus and close the deficit		  Partially Included. The state’s annual budget shortfall is now projected at $1.4 billion, down from initial estimates of nearly $3 billion. The final budget closed the gap through increased revenues from corporations and business owners and major reforms to Stay NJ. The state’s cash reserves continue to shrink, down to a projected $6.1 billion.

 
Fully funding pensions and schools  Yes. The final budget included the governor’s recommended full funding of the pension payment and K-12 school funding formula.

 
Raise revenues to balance the budget  Partially Included.The final FY 2027 budget included the governor’s main proposed revenue raisers:

Although these changes add $750 million to this year’s budget, the long-term outlook is more mixed. The annual cap on net operating losses ends in three years, while the Medicaid fee is front-loaded, with only $23 million expected in FY 2028.

The increased revenues help in the short term, but more lasting revenue raisers and corporate loophole closures were not included in this budget.
Maintain Stay NJ’s guardrails, specifically the original spending rules that require a healthy budget surplus  Yes. The governor’s proposed reforms to Stay NJ are largely intact, with the program now limited to households with up to $200,000 in income and maximum benefits of $6,500 only available to those with up to $100,000 in income. These changes, which align with prior NJPP recommendations for reform, will reduce projected costs by $450 million. The cost of the program remains high at $742 million, setting up a potential need for more reform in the future.

 
Maintain funding for services for immigrants Yes. The approved budget increases funding by more than $20 million for legal services and representation for New Jersey residents facing detention and deportation. It also preserves funding levels for programs such as Cover All Kids, which provides health insurance for children regardless of immigration status.

 
Expand and improve tax credits for working families Yes. The budget included a 25 percent increase in the state’s Child Tax Credit, committing $50 million to assist families with incomes less than $80,000 annually with young children at home. NJPP has called for expanding the Child Tax Credit and Earned Income Tax Credit to improve affordability for working families.
Increase benefits in WorkFirst NJ to reduce poverty  No. The budget did not increase benefit amounts for WorkFirst NJ, which provides cash assistance to low-income households.

 
Expand affordable health insurance options Partially Included. The budget continued to fund Cover All Kids, spending $169 million on the program to keep pace with enrollment. Medicaid is also setting aside $10.5 million to carry out the new federal work requirements under H.R.1. But the major proposal to address state-funded health insurance focused on a fee on employers with Medicaid-enrolled employees, rather than the expansion or protection of existing health insurance coverage.

 
Keep the Corporate Transit Fee funding transit Yes. The budget directed Corporate Transit Fee funds only to New Jersey Transit, not to the General Fund or to paying for other programs.

 
Use the Clean Energy Fund only for clean energy projects  No. The budget continued diverting $140 million from the Clean Energy Fund for utility costs and operations of New Jersey Transit, rather than on clean energy projects. The budget also transferred funds meant for long-term infrastructure such as energy efficiency and storage to short-term ratepayer relief.

 
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 refer to the Appropriations Act (A-5327/S-2027) 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.

A Smarter Stay NJ: The Governor’s Changes Are a Good Start

Posted on by Peter Chen

Every senior in New Jersey deserves to grow old in their own home, with the stability and dignity that comes with it. And when the state spends public dollars to make that possible, those dollars should reach the people who need help the most, not the households that need it least.

Stay NJ, the state’s newest property tax rebate program, was not built that way. As designed, it sends some of its largest benefits to wealthy homeowners, offers nothing to senior renters, and carries a price tag headed toward $1.2 billion a year with no dedicated way to pay for it.

Gov. Mikie Sherrill’s budget proposal would begin to correct that. Her plan:

  • lowers the program’s income limit to $250,000 from $500,000
  • lowers the maximum benefit from $6,500 to $4,000

 

These changes reduce the cost of the program by more than $550 million, while continuing to provide benefits to most recipients. NJPP has previously proposed reducing the income limit and benefit amounts to control the cost of the program.

But these tweaks are a band-aid, not a full fix for what ails Stay NJ.

How Stay NJ works now, and why that’s a problem

Stay NJ is not a property tax cut. It is a check the state writes to certain homeowners aged 65 and older, worth up to half their property tax bill, up to a maximum of $6,500 a year. Under current rules, a household earning as much as $500,000 a year can qualify.

That design leads to outcomes that are hard to defend. Consider two seniors. A homeowner earning $450,000 with a $15,000 tax bill would get a larger state check than a senior with $20,000 in income and a $7,000 tax bill. Yet property taxes eat up far more of the second senior’s budget, making them far more likely to lose their home. A senior renter would get nothing at all from the program, regardless of income.

With high benefit amounts and a high income cap, the numbers add up fast. Left unchanged, Stay NJ would cost about $1.2 billion a year. That is roughly double what New Jersey spends on its Earned Income Tax Credit. The state EITC provides economic security for hundreds of thousands of working-class families.

What the governor’s proposal would do

Gov. Sherrill’s plan makes two changes:

  1. Lower the income limit from $500,000 to $250,000. This stops the state from sending subsidies to its highest-income households.
  2. Reduce the maximum benefit from $6,500 to $4,000.

Together, these changes would save the state more than $550 million and shrink the pool of recipients slightly – roughly 37,000 out of 480,000 total claimants, all earning over $250,000 per household.

Capping the income limit at $250,000 draws a sensible line. Fewer than 12 percent of New Jersey seniors have a household income over $200,000. NJPP has previously proposed a $150,000 cap, which would still cover 80 percent of seniors. There is little reason for the state to send a relief check to households earning a quarter-million dollars a year while families with far less go without.

Reducing the maximum benefit also helps target the aid to where it is most needed. Most recipients of Stay NJ receive far less than the $6,500 cap.

Instead of providing more benefits to low-income residents who are most in need of housing assistance, Stay NJ as currently written provides the highest average benefits to the highest-income recipients. Only households with incomes over $200,000 have average Stay NJ benefits above $4,000. This creates an upside-down system, where the highest income bracket gets more than twice as much in average benefits as households with less than $50,000 in income.

Beyond the distribution of Stay NJ benefits towards the wealthy, the $6,500 benefit cap is quite high for a government subsidy program, especially when compared to programs directly assisting people with low incomes.

For comparison:

 

Why this is the right call now

New Jersey faces a structural budget gap and a shrinking surplus, even as the latest revenue projections have come in stronger. Even with additional projected revenues, the state’s cash reserves would be roughly 9.8 percent, far below the 12 percent required by Stay NJ’s original legislation before benefits could go out. Meanwhile, schools across the state are facing layoffs and cuts, while public employee health benefits costs are projected to rise by double digits in the next year.

In that environment, spending nearly half a billion dollars to subsidize the state’s wealthiest seniors is hard to justify, especially when that money could do more good elsewhere.

The governor’s plan doesn’t fix what’s broken

Supporting these changes does not mean Stay NJ’s flaws are removed – just mitigated.

The deeper problems remain. Stay NJ still excludes senior renters completely, even though they face far higher rates of housing insecurity than homeowners. Roughly one in four New Jersey seniors rent, including more than half of Black and Hispanic/Latinx seniors, and they would get nothing from Stay NJ. Nationally, the poverty rate for senior renters is twice that of senior homeowners. The people most at risk of losing their housing are the ones the program leaves out.

And even after the governor’s changes, the program would still tilt toward wealthier households, because benefits are tied to property tax bills, which rise with home values. A reform that truly matched relief to need would lower the income limit further and extend help to renters. NJPP has recommended exactly that: The state should align the income cap with the ANCHOR program’s threshold and double the senior renter benefit, which remains at just $250. These changes would steer relief to the seniors most likely to lose their homes.

A more fruitful alternative to the complex web of property tax credit programs might be a straightforward “circuit-breaker” program that directly ties property tax relief to income level, ensuring that those with the greatest need are the ones who receive the benefit.

The Bottom Line

The governor’s proposal is a reasonable reform. It lets nearly every current recipient keep a benefit, saves the state hundreds of millions of dollars, and stops sending public money to households that don’t need it. Lawmakers should pass it, then keep going. New Jersey’s property tax relief should reach the homeowners and renters who need it most. Adopting these changes is a good start. Finishing the job means a property tax credit program that keeps residents housed and secure, without subsidizing the already-wealthy.

Lossmaxxing: Time To Crack Down on Paper Losses and Restore Corporate Tax Accountability

Posted on by Peter Chen

A fair corporate tax system tracks corporate profits: when business booms, companies pay more; when business slumps, they pay less. Companies generating more profits should pay more in taxes to reflect their relative wealth.

The “net-operating-loss” (NOL) deduction originated from this principle of tax equity. It allows companies to reduce their taxable profits by offsetting them with losses from earlier years.

But the deduction’s expansion in recent years has created opportunities for very profitable corporations to reduce their tax rates, sometimes to almost nothing.[1]

Net-operating-losses have grown substantially, and these large deductions are concentrated in a small number of large corporations:

  • The NOL deduction cost New Jersey roughly $1.2 billion in lost revenue in tax year 2023.[2]
  • Nearly $1 billion of the program’s cost came from less than one percent of companies.[3] Those filers each took deductions worth $1 million or more.
  • Of corporate filers claiming more than $1 million in tax deductions from net operating losses, almost two-thirds reduced their taxable income to $0 using the net-operating-loss deduction with other credits and deductions.[4]

 

Reforming this deduction will rein in the overall cost and discourage corporations from using paper losses to avoid taxes, with minimal effect on most New Jersey businesses. Fewer than one percent of corporate tax filers in the state would be affected by a $1 million cap on net-operating-loss deductions.

NJPP recommends:

  • Adopt Gov. Sherrill’s proposed temporary cap on net-operating-loss deductions of $1 million or more.
  • Permanently reform NOLs by reducing the size and duration of deductions to discourage tax avoidance.
  • Prevent profitable corporations from claiming low to no tax liability.

 

The Original Issue: “Smoothing” Corporate Taxation

The net-operating-loss deduction originally came from a reasonable problem: the disconnect between business cycles and tax cycles.[5] Although corporate income tax collection is annual, business cycles themselves are often longer or shorter. Business can be bad one year and good the next, disconnected from the changing of the calendar.

The corporate income tax system looks at income or profits — revenues minus expenses:

  • If a company makes profits, it is taxed on those profits.
  • If a company makes no money or loses money, the state collects no tax on those losses. Nor does it send money back to the corporation. These are net operating losses.

 

Whether sales or purchases happen on one side of the one-year mark or the other can make a big difference in tax collection.

Say Alpha Co. has a big loss in year 2023, losing $1 million. Then in 2024, it collects $1 million in profit from a sale in January 2024. Alpha Co. pays $0 in 2023 in corporate income tax, but pays tax in 2024 on the $1 million in profits.

Beta Co., meanwhile, also had $1 million in costs in 2023, but it made its big $1 million sale in December 2023. Now Beta Co. has $0 in profit in Year 1 and $0 in profit in Year 2, and therefore $0 in tax liability for both years.

Across the two years, the hypothetical companies Alpha Co. and Beta Co. averaged $0 in profits, but because of the annual reporting requirements in the tax code, each company paid very different tax amounts.

To better reflect this reality, the tax code has long allowed companies to shift their net operating losses across different years to “smooth” the realities of the business cycle.

With the net operating loss “carryforward” (carrying the loss forward from 2023 to 2024), Alpha Co. can apply its 2023 loss against profits in 2024, resulting in the same tax result across both scenarios.

Problem solved: the two companies are now treated similarly.

Problem Not Solved: How NOL Growth Went Out of Control

Real companies do not operate like the hypothetical ones in the previous example and have increasingly used net operating losses to reduce tax liability. Over the decades, net operating losses for tax purposes have become disconnected from the corporate profits that big businesses report to their investors. Companies have figured out that those net operating losses are valuable as tax assets.[6] When federal income taxation began, these losses could be carried over one year.[7] Today, federal tax law allows for unlimited carryforward, while New Jersey law limits carryforward to 20 years.[8]

These expansions have coincided with growth in net-operating-loss activity as a means of reducing corporate tax liability. NOL deductions from tax year 2023 returns cost the state $1.2 billion.[9] That is roughly a quarter of the $4 billion in corporate business tax the state collected in Fiscal Year (FY) 2025, when those returns were primarily processed.[10]

These losses piled up against a backdrop of record-high corporate profits nationally. Even as corporations reported strong earnings to shareholders, their New Jersey tax filings claimed billions in prior-year losses.

Nationally, Corporate Profits Continue to Reach Record Highs

Several policy changes drove this disconnect:

  • The carryforward period for net-operating-losses in New Jersey is now 20 years long, compared to seven years prior to 2018.[11]
  • New Jersey allows corporations to reduce their tax bill by up to 80 percent of their taxable profits.[12]
  • According to one study, 90 percent of large corporations disclosed a net-operating-loss carryforward.[13]

 

Once these losses are incurred, the long carryforward period turns them into a valuable asset corporations can shift to later years to offset profits.[14] And because of differences in accounting requirements, a company can show a profitable year to investors, while showing a net operating loss to the state tax authority.

For example, in calendar year 2025, Alphabet, Google’s parent company, reported $132.1 billion in “net income” to its investors in its financial disclosures.[15] Despite the corporation’s high profits, the value of its total net-operating-loss carryforwards increased by more than $1 billion over the prior year.[16] The exact mechanics behind how these assets were generated are not publicly available, but the fact that a profitable year can somehow result in more NOL value underscores how disconnected the deduction is from reality.

The expansion of net-operating-loss claims also affects state revenue estimates. Years that look strong on paper for the state can still produce disappointing revenue if corporations apply NOL deductions to lower their tax bills.

In many cases, those reductions eliminate the tax filers’ obligations entirely. Only 816 corporations out of more than 107,000 total reported a net-operating-loss deduction larger than $1 million.[17] Of those, nearly two-thirds claimed $0 in corporate income in tax year 2023.[18] In other words, they lowered their reported profits to nothing using previous loss carryovers in combination with other credits and deductions.

This also creates incentives to manufacture paper losses that exploit the tax code to avoid or reduce taxation, when the overall corporation actually saw no change or even a gain in actual profits for investors.

For example, say that Alpha Co. USA transfers its patent for a product to Alpha Co. Switzerland. Alpha Co. USA now pays a royalty fee to the Swiss company it also controls, creating a large expense that produces a net-operating-loss for New Jersey tax purposes.

Nothing in reality has changed for Alpha Co. The shareholders and corporate entities have exactly as much money as they did before. Alpha Co. could theoretically increase the payment to the Swiss company to inflate the value of the loss, even though the subsidiary and the parent company are part of the same whole.

But to New Jersey tax authorities, the corporation appears to be taking a loss. Meanwhile, the overseas profits are taxed at lower, more favorable rates.[19]

Without looking at individual returns or corporate books, it is difficult to measure how widespread these tax-avoidance schemes are, but the deductibility of net-operating-losses in future years makes these arrangements more attractive.

The end result is substantial revenue loss to the state, concentrated among corporations with NOL deductions larger than $1 million.

New Jersey Loses Revenue from Net-Operating-Loss Deductions

Policy Solutions and Reforms

New Jersey can reduce the cost of the net-operating-loss deduction, through commonsense reforms that reduce the appeal of the deduction for very large, profitable corporations. With the bulk of the benefit going to very large NOL claims, relatively modest changes to NOL requirements, as other states have done, can improve state finances without affecting tax returns for the overwhelming majority of business filers.

1. Adopt Gov. Sherrill’s proposed temporary cap on net-operating-loss deductions of $1 million or more

Gov. Sherrill’s budget proposal includes a temporary cap on net-operating-loss deductions at $1 million annually for the next three years.[20] The Treasury estimates that this reform would reduce the state’s cost of the net-operating-loss deductions by $485 million.[21] Temporary restrictions and caps are a useful tool for reducing current budget pains, one New Jersey has used before in 2002 and 2003, when it fully suspended the deduction.[22]

Less Than 1 Percent of Corporate Tax Filers Would Be Affected by a Cap on Net-Operating-Loss Deductions

The proposed reform would only affect the tax returns of less than one percent of corporate tax filers, leaving the majority of corporations unaffected.

2. Permanently reform NOLs to reduce the size and duration of net-operating-loss deductions and discourage tax avoidance

The governor’s proposed change only delays the cost of net-operating-loss deductions to the state in future years, without changing the underlying structure that has driven this expanding revenue loss.

More permanent changes will be needed to rein in NOLs beyond a few years, such as:

  • Reducing the carryforward period from 20 years to a shorter window, which would reduce the value of these claims as deferred tax assets and reduce year-to-year revenue volatility.
  • Reducing the percentage of losses a company can claim each year to 40 percent of taxable income, which would reduce large claims by companies in any given year.
  • Capping the overall amount of losses that can be claimed at $1 million permanently, which would limit use by larger businesses with more sophisticated tax avoidance strategies.

 

The dramatic expansion in NOL activity can be tamed with legislation, as other states have demonstrated:

  • Many states have shorter carryforward periods.[23]
  • Minnesota has reduced the NOL deduction to 70 percent of a corporation’s taxable income.[24]
  • Other states have pursued caps or restrictions on the total dollar value of losses claimed.[25]

 

Additionally, to avoid affecting small and start-up businesses, these reforms could be limited to corporations with gross revenues above $1 million.[26]

3. Prevent profitable corporations from claiming low to no tax liability

Net-operating-loss claims are only one piece of a broader corporate tax avoidance pattern. Addressing the larger problem will require additional reforms.

For example, New Jersey could increase the minimum tax paid by corporations that report $0 in profits. Federally, an “alternative minimum tax” imposes a 15 percent floor on income reported in corporate financial statements, preventing companies from avoiding federal taxes entirely.[27]

New Jersey currently has its own version of a minimum tax for businesses reporting $0 in profits. A corporate tax filer reporting no income needs to pay only $2,000 in taxes, even if its gross revenues are greater than $1 million.[28] Raising the floor on minimum taxes for large corporations could reduce the appeal of tax-avoidance strategies like net-operating-loss maximization.

Conclusion

Net-operating-loss carryforward is a policy that has grown far beyond its initial goal of smoothing the realities of the business cycle. The fewer than 1,000 claimants of net-operating-losses larger than $1 million are not mom-and-pop flower shops. They are large, sophisticated corporations using tax planning strategies to minimize their tax obligations.

The math is simple: $1.2 billion in NOL deductions is $1.2 billion the state cannot put toward health care, transit, and education. At a time when New Jersey faces a roughly $1.6 billion structural budget deficit, ensuring that large corporations pay taxes based on their actual profits is essential to keeping those critical state programs funded.[29]

End Notes

[1] NJPP obtained data from the New Jersey Treasury Department to identify net-operating-loss claims and revenue losses over time. This data informs the analysis contained in the report.

[2] Based on New Jersey Treasury Department data on file with the author

[3] Based on New Jersey Treasury Department data on file with the author

[4] Based on New Jersey Treasury Department data on file with the author

[5] For background on the origin of the tax treatment of net operating losses, the Congressional Research Service has a useful survey. Congressional Research Service. The Tax Treatment and Economics of Net Operating Losses (No. R46377). Oct. 19, 2020.

[6] Thomson Reuters Tax Glossary. Deferred Tax Assets. April 23, 2026.

[7] Congressional Research Service. The Tax Treatment and Economics of Net Operating Losses (No. R46377). Oct. 19, 2020. P. 3.

[8] 26 U.S. Code Sec. 172(b)(1)(A)(ii)(II) (2026). N.J. Admin. Code Sec. 18:17-5.13(a) (2026).

[9] Based on New Jersey Treasury Department data on file with the author

[10] State of New Jersey. Governor’s Budget Message: Detailed Budget Recommendations, Fiscal Year 2027. March 10, 2026. P. C-3

[11] New Jersey carryover of net-operating-losses has ranged from seven years (1984-2002), no carryover permitted (2002-2003), carryover limited at 50 percent (2004-2005), then a return to seven years (2006-2009), then 20 years in 2018. N.J. Stat. Sec. 54:10A-4(k)(6)(A), (v)(1) (2026). See also P.L. 2018, c. 48.

[12] New Jersey Division of Taxation. Net Operating Losses and Combined Groups (No. TB-95(R)). Oct. 11, 2023. Pp. 5-6.

[13] Heitzman, S. & Lester, R. “Tax Loss Measurement.” Nat’l Tax Journal vol. 74(4). 2021.

[14] Thomson Reuters Tax Glossary. Deferred Tax Assets. April 23, 2026. See also General Accountability Office. TAX COMPLIANCE: Challenges to Corporate Tax Enforcement and Options to Improve Securities Basis Reporting. June 13, 2006. (“Tax avoidance has become such a concern that some tax experts say corporate tax departments have become ‘profit centers’ as corporations seek to take advantage of the tax laws in order to maximize shareholder value.”).

[15] Alphabet Inc. Form 10-K, Fiscal Year Ended December 31, 2025. P. 32.

[16] Alphabet Inc. Form 10-K, Fiscal Year Ended December 31, 2025. P. 85.

[17] Based on New Jersey Treasury Department data on file with the author

[18] Based on New Jersey Treasury Department data on file with the author

[19] Wamhoff, S. Tax Haven Data Demonstrate Need for Global Minimum Tax Despite Opposition from Trump Administration. Institute on Taxation and Economic Policy. Dec. 10, 2025.

[20] State of New Jersey. Budget in Brief: Summary of Budget Recommendations, Fiscal Year 2027. March 2026. P. 50-51.

[21] State of New Jersey. Budget in Brief: Summary of Budget Recommendations, Fiscal Year 2027. March 2026. P. 50-51.

[22] See Office of the State Treasurer. Press Release: Treasurer McCormac Delivers Testimony on FY 2002-2003 Revenues and Corporate Tax Reform Before Assembly Budget Committee. May 30, 2002.

[23] See, e.g., New Hampshire Admin. Code Sec. Rev 303.03(b) (10-year carryforward); 32 Vermont Statues Annotated Sec. 5888(4) (10-year carryforward); Minnesota Statutes 290.095 Subd. 3(a) (15-year carryforward).

[24] Minnesota Statutes 290.095 Subd. 2(c). 2026.

[25] See Illinois Public Act 103-0592. 2024. P. 908.

[26] California has, in prior years, suspended its net-operating-loss deduction for tax filers with income over a certain dollar amount. See California Franchise Tax Board, Multistate Audit Technical Manual, Chapter 8010. March 26, 2026.

[27] Patel, E. The corporate AMT: Understanding low tax liabilities as a policy choice. Brookings Institution. Nov. 13, 2024.

[28] N.J. Admin. Code Sec. 18:7-21.19.

[29] Binder, A. Testimony of Aaron Binder, Treasurer, Before Assembly Budget Committee. April 6, 2026. Pp. 7-8.

Not As Easy As ABC: How NJ Can Recover More Than $120 Million From a Tax Break for the Wealthy

Posted on by Peter Chen

New Jersey’s Alternative Business Calculation (ABC) has drifted from its original purpose: closing a gap in the tax code for individuals with business income. It is now a $190 million expense that disproportionately benefits high-income residents.[1] In the last decade, the Alternative Business Calculation has grown rapidly and tilted further toward the
wealthiest filers:

  • The benefit is highly concentrated: 60 percent of the benefits go to roughly 0.6 percent of New Jersey tax filers, all with more than $1 million in annual income.[2]
  • The cost is growing quickly: Since 2016, the deduction has more than doubled in size, outpacing all other personal income tax deductions combined.[3]
  • In that time, it has skewed even more toward the wealthy: tax filers making $2.5 million or more now claim more in ABC benefits than all tax filers below $500,000 combined.[4]

 

Reforming this deduction would raise much-needed revenue for a state facing a structural deficit, without affecting tax returns for 99 percent of New Jersey households.[5] Gov. Sherrill’s Fiscal Year 2027 budget proposal does exactly that, reining in the ABC’s cost and limiting its benefits to high-income households.[6]

What is the Alternative Business Calculation?

The Alternative Business Calculation is a state tax provision that lets filers with certain kinds of business income use losses in one business category to reduce taxable income from another — cutting their personal income tax bill. Filers can deduct 50 percent of these losses, and they can carry unused losses forward for up to 20 years.

The provision was meant to fix a quirk in how New Jersey taxes business income. Generally, New Jersey’s gross income tax, as the name suggests, taxes a filer’s gross income — their income before expenses.

For business owners, the state counts income after counting business losses.

Illustration: Revenue and losses at Joe’s hardware store

If Joe’s hardware store sells $500,000 in products but has $400,000 in business expenses like payroll and rent, Joe’s business income for New Jersey tax purposes is $100,000.If Joe’s hardware store sells $400,000 in products but has $500,000 in expenses, his business income is $0.

Before 2011, New Jersey’s income tax let business owners cancel out losses only within the same type of business. Two sole proprietorships? A loss from one could offset profit from the other. But a sole proprietorship plus a partnership? Those were treated as separate buckets — a loss in one bucket couldn’t reduce income in the other.[7]

The Alternative Business Calculation changed that. Filers with business income can now offset losses across four categories: sole proprietorships, rental and royalty income, partnership income, and S corporation income.[8] They can claim 50 percent of these losses against their other income in the same categories.[9] The ABC also lets filers “carry forward” losses for 20 years, applying them to reduce business income in future tax years.[10]

The result: a filer with business income today can partially offset profits in one category with a loss in another.

Illustration: Joe’s alternative business calculation treatment of a rental income loss

Say Joe’s hardware store has a business profit of $100,000, but Joe loses $50,000 on a rental property. Joe can claim 50 percent of the rental loss as a deduction under the ABC. Joe can subtract $25,000 from his hardware store profit, reducing it to $75,000.

Joe can also carry that $25,000 loss to a future tax year. So if Joe had no other business income this year, he could reduce next year’s business income (or any year for the next 20) by $25,000 instead.

What’s the problem with the ABC?

A loss on paper can quickly become a generous deduction to offset high income and reduce
tax liability.

In theory, an individual with a $100,000 gain and a $100,000 loss would have $0 in income. Without the Alternative Business Calculation, that person would not be able to offset the gain. But this deduction can quickly expand to include “paper” losses, even when the filer’s actual financial position has not changed.

Illustration: How Joe lowers his income with a “paper” loss

Joe’s hardware store makes $100,000 in business income this year.

Joe also owns a second home in Florida. Joe pays $20,000 in maintenance, fees, and taxes on the home each year. This year, Joe rents the home to his brother for a below-market value of $10,000. Joe claims a rental income loss of $10,000. He can now subtract 50 percent of this “loss” from his business income, reducing his taxable income by $5,000.

Had Joe left the home vacant or used it himself, none of the $20,000 in maintenance, fees, and taxes would have been deductible. Those would have been personal expenses on a second home. By renting to his brother below cost, Joe converts $5,000 in personal expenses into a
tax deduction.

This seems like a small loophole, but it can drive substantial losses for the state that are difficult to track — losses that tax lawyers and accountants can exploit. Sophisticated tax filers can shift losses around on paper through royalty payments, multiple partnerships, or S corporations to inflate losses and offset business income. The types of businesses with income subject to the ABC are growing in number and complexity, making tax enforcement increasingly difficult.[11] Large energy, investment, and law firms are often organized as partnerships, with income passing through multiple entities and owners.[12]

How much does this cost the state?

The Alternative Business Calculation has grown rapidly — from $92.6 million in cost to the state in tax year 2016, when the current version became law, to $192.6 million in 2024 — growing at a rate of 108 percent.[13] All other gross income deductions or exemptions grew by roughly 49 percent.[14]

The ABC Deduction Has Grown at Twice the Rate of All Other Gross Income Deductions

Claims of these losses as deductions increased even as business owners’ profits also rose.

Between 2016 and 2024:

  • New Jersey business owners’ income rose by 24 percent.[15]
  • New Jersey business owners’ reported alternative business losses rose by 108 percent.[16]

 

Without a comprehensive review of each deduction, this growth could reflect real loss activity carried forward. But whatever the cause, the cost to the state has continued to climb, even as business income for proprietors as a whole has grown. The 20-year carryforward window also makes the deduction’s annual cost hard to forecast — filers can hold losses and deploy them in the years that suit them best, leaving the state to absorb the timing.

Who benefits from the ABC deduction?

The ABC deduction disproportionately benefits New Jersey’s highest-income households.

Out of the $192 million in costs to the state, $114 million goes directly to households with $1 million or more in income.[17] That means 60 percent of this benefit goes to less than one percent of households.

Over time, the Alternative Business Calculation deduction’s tilt toward the wealthy has grown even more. For households with less than $500,000 in income, the deduction amount has grown by about 50 percent since 2016, similar to the growth in other deductions.[18] But for households with more than $1 million in income, the deduction has grown by 150 percent.[19]

Even among households with more than $1 million in income, the majority of the deduction goes to the even wealthier — those making $2.5 million or more.[20]

Benefits of New Jersey's ABC Deduction Disproportionately Go to the Highest-Income Filers

Expanded tax benefits for business income also risk worsening the racial wealth gap. White tax filers on average have substantially more business income than Black or Hispanic filers.[21]

The result of the ABC deduction is a tax benefit that is so tilted towards the very wealthy that income-filers with more than $2.5 million in income receive more benefit than all households with less than $500,000 income combined.

How should the state modify the ABC deduction?

New Jersey should reform the ABC deduction. Its cost has more than doubled, and most of the benefit flows to high-income households. Reining in this growth would raise revenue for the state while leaving the vast majority of New Jersey tax filers unaffected.

Set income limits to prevent a shift in revenue to the very wealthy.

Gov. Sherrill’s Fiscal Year 2027 budget proposal includes a maximum income of $1 million for those claiming the deduction. An income cap is a sensible way to rein in the growth of this deduction and prevent it from subsidizing high-income residents, saving the state $114 million in the process.[22]

The Governor’s proposal reduces the cost further by halving the benefit for incomes between $500,000 and $1 million. This would constrain revenue losses while maintaining some benefit for business proprietors facing genuine losses, raising about $18 million in revenue.[23]

Limit carryforward to fewer years

Another change that could help restrain the growth of the deduction is limiting how far losses can be carried into later years. Currently, the law allows tax filers to carry forward their alternative business loss for 20 years.[24] If the goal of the deduction is to allow business owners to control for year-to-year variation in business income, a one- or two-year window makes more sense than one that lasts two decades. If Joe’s hardware store loses $200,000 in year one, those losses should not still be available to reduce his income 10 years later. Reducing the carryforward would also make revenue collection more predictable, since filers would claim losses sooner rather than holding them for the most advantageous year.

Apply higher scrutiny on pass-through income

The rapid growth in the ABC deduction also points to a growing issue facing state governments: the shift from traditional corporations that pay corporate taxes toward businesses that pay individual income tax instead through their owners.[25] More than half of business income nationally now flows through these “pass-through” entities.[26] A structure designed for small businesses has become a tool for the ultra-wealthy to hide complex tax-avoidance structures.[27]

In 2023, a federal Government Accountability Office report detailed the need for more audit and compliance work for partnership income, especially for large and complex partnerships.[28] Beyond the more technical recommendations, the report called for expanding the tax compliance workforce and adding resources to address potential noncompliance. This
aligns with NJPP’s prior recommendation to restore the state’s auditor workforce to pre-Christie-era levels.[29]

Reining in deductions like the Alternative Business Calculation would help ensure that pass-through status serves the small businesses it was meant to support, rather than becoming another tax break for the very wealthy.

End Notes

[1] State of New Jersey. Tax Expenditure Report Fiscal Year 2027. February 2026. P. 7

[2] NJPP obtained data from the New Jersey Treasury Department to identify alternative business calculation deduction claims and revenue losses over time by income. This data informs the analysis contained in the report.

[3] Based on New Jersey Treasury Department data on file with the author.

[4] Based on New Jersey Treasury Department data on file with the author.

[5] Based on New Jersey Treasury Department data on file with the author.

[6] State of New Jersey. Budget in Brief: Summary of Budget Recommendations, Fiscal Year 2027. February 2026. P. 48.

[7] Sponsor’s Statement, S. 2754 (2011-12 Session) (2011).

[8] Pub. L. 2011, c. 60. See also N.J. Admin. Code Sec. 18:35-2.8(c) (2025).

[9] Pub. L. 2011, c. 60. See also N.J. Admin. Code Sec. 18:35-2.8(c) (2025).

[10] Pub. L. 2011, c. 60. See also N.J. Admin. Code Sec. 18:35-2.8(c) (2025).

[11] Government Accountability Office. Report to the Chairman, Committee on Finances, U.S. Senate: Tax Enforcement, IRS Audit Processes Can Be Strengthened to Address a Growing Number of Large, Complex Partnerships (GAO-23-106020). July 2023. Pp. 10-19.

[12] Mitchell, David. The other two-tiered U.S. tax system: How pass-through businesses let the ultra-wealthy dodge federal taxes. Washington Center for Equitable Growth. April 15, 2026.

[13] Based on New Jersey Treasury Department data on file with the author.

[14] Based on New Jersey Treasury Department data on file with the author.

[15] U.S. Bureau of Economic Analysis and Federal Reserve Bank of St. Louis, Proprietors’ Nonfarm Income in New Jersey [NJONON], retrieved from FRED, Federal Reserve Bank of St. Louis; April 23, 2026.

[16] Based on New Jersey Treasury Department data on file with the author.

[17] Based on New Jersey Treasury Department data on file with the author.

[18] Based on New Jersey Treasury Department data on file with the author.

[19] Based on New Jersey Treasury Department data on file with the author.

[20] Based on New Jersey Treasury Department data on file with the author.

[21] Gale, W. et al. Does the Income Tax Discriminate on the Basis of Race and Ethnicity? Tax Policy Center Policy Brief. February 2025. P. 10.

[22] Based on New Jersey Treasury Department data on file with the author.

[23] Based on New Jersey Treasury Department data on file with the author.

[24] Pub. L. 2011, c. 60. See also N.J. Admin. Code Sec. 18:35-2.8(c) (2025).

[25] Mitchell, David. The other two-tiered U.S. tax system: How pass-through businesses let the ultra-wealthy dodge federal taxes. Washington Center for Equitable Growth. April 15, 2026.

[26] Tax Policy Center. What are pass-through businesses?  January 2024.

[27] Mitchell, David. The other two-tiered U.S. tax system: How pass-through businesses let the ultra-wealthy dodge federal taxes. Washington Center for Equitable Growth. April 15, 2026.

[28] Government Accountability Office. Report to the Chairman, Committee on Finances, U.S. Senate: Tax Enforcement, IRS Audit Processes Can Be Strengthened to Address a Growing Number of Large, Complex Partnerships (GAO-23-106020). July 2023. Pp. 10-19.

[29] Chen, P. Fair and Square: Changing New Jersey’s Tax Code to Promote Equity and Fiscal Responsibility. New Jersey Policy Perspective. Nov. 14, 2024.

A Safety Net in Retreat: An Obstacle Course Known as TANF

Posted on by Tonanziht Aguas

New Jersey thrives when every resident has their basic needs met. A pathway to achieve this is through reform of Work First New Jersey (WFNJ). WFNJ is the state’s umbrella program for cash assistance and job-related supports, covering three distinct components: the Temporary Assistance for Needy Families (TANF) program for families with children, General Assistance for adults without dependent children, and Emergency Assistance for households in crisis.[1]

The largest of the three is the TANF program, intended to lift families out of poverty and provide support as parents search for employment and build toward economic stability.[2] Yet, over time, this program has fallen short of that goal. Stagnant benefits, outdated eligibility rules, and a design that penalizes recipients have left families struggling to secure housing, maintain food security, and access the supports necessary for long-term economic stability.[3]

Gov. Mikie Sherrill’s administration and the legislature have an opportunity to reexamine how the state supports families with the lowest incomes. Put simply, the TANF program has not kept pace with the realities of life in the Garden State. Benefit amounts have lost more than a third of their purchasing power since 1998.[4] Eligibility rules make it difficult for families to access, save, and gradually exit the program. And because poverty in New Jersey is disproportionately experienced by Black and Hispanic/Latinx households, TANF’s restrictive rules and outdated benefit amounts have their largest consequences on the very communities already facing the steepest economic barriers.[5] This is true both for many families who manage to enroll in TANF, and for those who are shut out. This exclusion is a legacy of the racialized narratives that originally shaped TANF’s assumptions about who is “deserving” of help.[6]

Yet TANF is a cornerstone of New Jersey’s safety net. When adequately designed and funded, cash assistance provides families with financial stability and flexibility, improves children’s health and educational outcomes, and generates long-term returns that benefit entire communities.[7]

This report examines TANF’s gradual decline over 30 years and makes the case for the following reforms to strengthen the program:

  • Raising benefit levels, indexing them to inflation, and directing more TANF funding toward direct cash assistance
  • Updating eligibility thresholds and time limits to reflect today’s economic realities
  • Aligning work requirements with lived experiences and needs

 

Nearly Three Decades of Decline

TANF’s decline is the result of deliberate policy decisions. New Jersey set that trajectory beginning in 1997 by adopting rules stricter than federal law required. In the decades since, lawmakers have repeatedly chosen to leave those rules in place, even as the cost of living has soared and need has grown. The result is a program in steady retreat across three measures: the purchasing power of the TANF grant, the number of families TANF reaches, and the adequacy of the program’s design.

Benefits That Buy Less Each Year

Monthly grant amounts in New Jersey vary based on factors such as family size, income, and legal status, but to convey the scale of its growing shortfall, consider a family of three receiving the maximum benefit: $559 a month, or $6,708 a year in 2026.[8] By contrast, the original 1998 grant of $424 a month, worth about $850 in 2026 dollars, provided far more support than today’s benefit.[9]

Adjusted for inflation, today’s grant has lost more than one-third of its value.[10] What once covered a month’s groceries with some money left over for rent or utilities now barely covers food alone. For context, an analysis on typical household costs finds that a New Jersey family of three spends almost $10,300 a year on food, nearly $3,600 more than the entire annual TANF grant.[11]

New Jersey's TANF Benefits Have Lost More Than One-Third of Their Value Since 1998

The gap between what families receive and what they need to survive continues to widen. The 2026 federal poverty level (FPL) for a family of three is $27,320, yet TANF’s annual benefit amount is less than a quarter of that.[12] A family of three needs income closer to $80,000, roughly 300 percent of the FPL, to cover basic necessities without making trade-offs between essentials.[13] Most families receive less than the maximum grant, so what TANF provides falls even further short of what families need. The tens of thousands of New Jerseyans living in persistent and deep poverty (income below 50 percent of the FPL) feel this shortfall most profoundly.[14]

TANF's Limits Keep Families Locked Out and Left ShortThe latest meaningful adjustment to TANF’s cash assistance came in 2019-2020, when maximum monthly grant levels increased. For a family of three, this meant an increase from $424 to $559.[15] That increase was meaningful, but it was a one‑time event that partially restored the value TANF had lost over the prior two decades of inflation. Since then, the grant has continued to fall behind New Jersey’s rapidly rising housing, food, and transportation costs.[16]

A one-off increase temporarily slows the erosion of TANF’s value but does not reverse it. A stagnant monthly grant is not a solution. In the seven years since that increase, families have had to stretch already-thin budgets even further, likely giving up other basic needs to make ends meet.

A Safety Net That Reaches Fewer Families

TANF serves fewer families today than it did when it first rolled out, leaving more families without the cash assistance the program was created to provide. But a shrinking TANF caseload is not evidence of reduced need — it is the result of policy decisions that have steadily narrowed who can get assistance.

In 2025, TANF served an average of 26,700 people across New Jersey’s 21 counties, a sharp drop from more than 31,300 the year before, according to the latest Current Program Statistics report.[17] This decline does not signal less poverty. In fact, poverty in New Jersey remains widespread and entrenched: in 2024, roughly 860,000 residents lived below the federal poverty level.[18] The shrinking caseload instead reflects how difficult the program has become to access and remain on.

Before TANF replaced its predecessor, Aid to Families with Dependent Children (AFDC), New Jersey assisted far more families living below the FPL — 72 per 100 families living in poverty, well above the national average.[19] By 2022-2023, that number had fallen to just 11 families per 100, far below the national average of 20. If TANF reached the same number of families in poverty that AFDC had, an estimated 98,000 more families would be receiving support now.[20] Tens of thousands of families who would have qualified for TANF were, and continue to be, excluded by design.

What that retreat has meant for children in particular comes through most clearly in the numbers. NJPP analysis finds that TANF’s shrinking caseload has stripped away assistance that would have supported thousands more children statewide, a cumulative loss built up over years of declining reach.[21]

TANF Reaches Far Fewer Children in Poverty

The steepest declines are concentrated in high‑poverty counties such as Camden, Essex, and Hudson, areas where Black and Hispanic/Latinx communities also make up significant shares of the population.

New Jersey Counties with the Steepest Declines in TANF Support for Children, 1997 v. 2024

The program’s contraction has fallen hardest on the very communities that face the highest barriers to economic opportunity, a pattern rooted in long‑standing racial inequities in income, employment, and wealth that make Black and Hispanic/Latinx families more likely to experience deep poverty and need safety net programs like TANF to stay afloat.[22]

These inequities are visible both in who is likely to need assistance and in who is most affected when TANF reaches too few families. Many families living in poverty in New Jersey are led by women and people of color, and the families who do receive TANF reflect this as well. In Fiscal Year 2023, 47.8 percent of TANF recipients were Black and 31.9 percent were Hispanic/Latinx.[23] When TANF reaches fewer families overall, it disproportionately leaves these communities without the assistance they need to advance their economic security. The issue is not just about who enrolls, but also who is systematically shut out.

New Jersey has a policy history that explains how these inequities became embedded in the program. For example, the state was the first in the nation to adopt a “family cap” policy, which denied additional cash assistance to parents who had another child while receiving TANF.[24] Many of New Jersey’s TANF policies continue to be punitive and are rooted in racialized assumptions of who is “deserving” of help, frame a child’s access to help as dependent on the mother’s “character”, and depict and reinforce stereotypes of Black women and other women of color that have eroded public support for assistance and paved the way for policies centered on work and personal responsibility, regardless of economic challenges.[25] Although the family cap was repealed in 2020, its underlying racial assumptions still shape key features of TANF today, including strict work requirements, harsh sanctions, and narrow eligibility rules.

Without intentional reform to correct these issues, TANF’s restrictive design will continue to reproduce them. Strengthening the program is economically rational. It is also essential to ensuring all families and children who face steep barriers are not systematically excluded from the support they need to reach stability.

A Design That Stops Families at the Starting Line

Low benefits and a declining reach are just some parts of the problem. TANF’s design makes it difficult for families to get ahead in many other ways. When TANF was created, New Jersey adopted rules that went further than federal law required. The state imposed 35 hours of work activity per week instead of the federal 20 to 30 hours, limited work exemptions for parents of infants to just three months instead of the federal allowance of up to 12, and layered on complex application processes and administrative hurdles.[26] Over time, these restrictive policies, compounded by understaffing and outdated administrative systems, transformed a safety net into what many families experience as an obstacle course.

A major barrier comes from how the program treats earnings, which determines a family’s monthly grant. TANF uses a strict income limit to determine whether a family still qualifies for help. With the exception of the first month on TANF, a significant portion of income earned every month is counted right away against a fixed cap. Even a small raise or a few extra work hours can push a family over that limit, causing their cash assistance to drop sharply or end altogether. In essence, this “benefits cliff” leaves families worse-off for trying to earn a little more.[27] More generous income‑disregard policies, which allow parents to keep some of their earnings out of the eligibility calculation for a longer period of time, would give families the breathing room to increase their income without immediately losing the support they still need.

TANF’s structure also limits how long families can receive help. Federal law caps assistance at 60 months (or five years) over a lifetime, and New Jersey adheres to that limit. In 2024, 321 families had their cases closed solely because they reached this lifetime limit. If a family remains on TANF all the way to month 60, it is likely that family has not reached stability by month 61, yet the program cuts them off anyway.[28] This underscores how arbitrary the five‑year cap is, especially given that many families face circumstances that cannot be resolved within such a rigid timeframe, including limited education, disabilities, chronic health needs, and caregiving responsibilities.[29] The program further assumes nearly any job will lift families out of poverty. Yet even with New Jersey’s strong minimum wage, a family of three relying on full-time work plus the maximum monthly grant still falls short of what is required to cover basic expenses like rent, food, utilities, and transportation.[30]

These design choices are negatively reinforced by how the state allocates its TANF dollars.[31] New Jersey has broad flexibility in how it spends its federal block grant and invests state funds in the TANF program, yet in 2023 directed only five percent of TANF funding toward cash assistance.[32] A significant share of funding went to programs like pre‑K, child care, and refundable tax credits, investments that strengthen long‑term economic security but do not replace the predictable, month‑to‑month income families need to keep a roof overhead or cover daily essentials. When so little of the block grant is dedicated to monthly cash assistance, TANF cannot function as the first‑line support it was designed to be. Instead, families encounter a system that offers help far too late. Help comes during the next tax filing season if they earn enough to file or when a child finally reaches a certain age. It is not available when they are standing at the starting line trying to regain their footing.

What New Jersey Should Do Next

The shortcomings described above do not operate independently. They compound each other in ways that steadily weaken the program’s ability to lift families out of poverty. New Jersey must take the lead in protecting families from economic hardship through a stronger, more modern TANF — one that reflects today’s economic realities and provides families with the stability required to build a secure future. New Jersey has both the capacity and the responsibility to act on the following core reforms: raising benefit levels and indexing them to inflation, updating eligibility thresholds and time limits to reflect today’s economic realities, and aligning work requirements with federal standards and lived experience.

Raising Benefit Levels to Reflect Real Costs

The most urgent reform is raising the grant. Benefits should be increased to at least 50 percent of the federal poverty level. In 2026, that means a monthly grant of roughly $1,138, compared to the current maximum of $559 — about $6.20 per day per person for a family of three. New Jersey should also adopt an automatic cost-of-living adjustment (COLA) so that benefits keep pace with inflation without requiring a legislative act every year.[33] Without a COLA, any increase will lose value too quickly.

In alignment with this, New Jersey should direct a substantially greater share of its TANF funding toward cash assistance. In 2023, the state diverted most TANF funds away from cash assistance, when those dollars should go directly to families.[34] While TANF’s flexibility allows states to fund a wide range of programs, too few dollars currently reach families who need immediate support in the form of a monthly grant. Prioritizing cash assistance would ensure that TANF fulfills its core purpose: helping families meet basic needs during periods of financial instability.

Updating Eligibility Rules and Limits

New Jersey must update its eligibility rules and strengthen the pathways that allow families to enter, remain, and gradually transition off TANF. This includes a higher asset and income limit, removing state-level restrictions that prevent families from accessing the full federal 60-month lifetime limit, prioritizing stability, and eliminating full family sanctions if work requirements are not fully met. All are changes that would better reflect the realities of low‑wage work, caregiving, and economic volatility.

At the same time, expanding income disregards — allowing families to keep more of their earnings when applying for TANF and while participating without losing eligibility, and for a longer period — would allow families to build earnings steadily, maintain housing and work supports, and exit TANF with greater stability.[35]

Finally, simplifying application processes and addressing chronic administrative understaffing, including reducing documentation burdens and improving access, would remove barriers that likely discourage eligible families from accessing or maintaining support.[36] Together, these changes would help reverse the steep decline in caseloads and ensure that assistance reaches families experiencing the deepest levels of poverty.

Aligning Work Requirements with Economic Reality

New Jersey’s work requirements go beyond those set by the federal government, likely pushing families out of the program when they cannot meet rigid participation rules and work requirements.[37] Federal TANF guidelines generally require 20 hours per week of participation in a work activity, job, or a combination of both for single parents with children under age six, and 30 hours per week for those with older children.[38] New Jersey, by contrast, requires 35 hours per week for most parents — a threshold that is difficult to meet for families dealing with unstable jobs, unpredictable schedules, limited child care, or transportation barriers.[39]

Bringing state rules in line with federal standards would likely reduce unnecessary case closures and better reflect the realities of low‑wage work. Just as important, work activity requirements should recognize that not all jobs offer a path out of poverty. Treating a broader range of education, training, and credential‑building programs as core tools that may fully, not just partially, meet work activities would ensure that TANF supports long‑term stability and economic mobility rather than penalizing families for circumstances beyond their control.

A Call to Action

New Jersey lawmakers must reject the status quo that leaves families, especially children, without the resources they need to survive, let alone thrive. Strengthening TANF through reforms, including higher benefit levels, fairer eligibility rules, and updated work requirements, is essential to protecting the hundreds of thousands of residents living in or close to deep poverty. These reforms would not only stabilize families today but also reduce long-term costs associated with housing instability, food insecurity, and poor health outcomes — and would do so without creating new programs or new bureaucracy.

Lawmakers should enact comprehensive TANF reforms in the current legislative session to reach the families this program was designed to serve.

End Notes

[1] Mercer County Board of Social Services, Cash Assistance, Accessed Mar. 24, 2026.

[2] New Jersey Department of Human Services, Work First New Jersey, Jan. 20, 2026.

[3] Holom-Trundy, B., Outdated and Ineffective: Why New Jersey Needs to Update Its Top Anti-Poverty Program, New Jersey Policy Perspective, May 22, 2025.

[4] NJPP Analysis of U.S. Department of Health and Human Services Federal 2026 Poverty Guidelines to determine the amounts for varying federal poverty levels, Work First New Jersey grant amounts provided through the New Jersey state budget and Department of Human Services, and Bureau of Labor Statistics Consumer Price Index Calculator to consider inflation, Jan. 2026.

[5] Aguas, T., Census 2024: Economic Gains Bypass Many New Jersey Communities, New Jersey Policy Perspective, Oct. 21, 2025.

[6] Dalaker, J., An Introduction to Poverty Measurement, Library of Congress, Sep. 16, 2024. Administration for Children & Families, Characteristics and Financial Circumstances of TANF Recipients, Fiscal Year 2023, Table 10, Oct. 3, 2024. Floyd, Ife, et al., TANF Policies Reflect Racist Legacy of Cash Assistance, Center on Budget and Policy Priorities, Aug. 4, 2021.

[7] Haider, Areeba, et al., Re-Envisioning TANF: Toward an Anti Racist Program That Meaningfully Serves Families, Georgetown Center on Poverty and Inequality, Oct. 20, 2022.

[8] New Jersey Department of Human Services, New Jersey State Plan for Temporary Assistance for Needy Families (TANF) FFY 2024 – FFY 2026, Schedule I and Schedule II, 2024.

[9] NJPP analysis of Bureau of Labor Statistics Consumer Price Index Calculator data to consider inflation and Welfare Rules Database on TANF monthly amount for a family the size of three.

[10] NJPP Analysis of U.S. Department of Health and Human Services Federal Poverty Guidelines for 2026 to determine the amounts for varying federal poverty levels, Work First New Jersey grant amounts provided through the New Jersey state budget and Department of Human Services, and Bureau of Labor Statistics Consumer Price Index Calculator to consider inflation, Jan. 2026.

[11] Massachusetts Institute of Technology, Living Wage Calculation for New Jersey, Feb. 28, 2026.

[12] NJPP analysis of TANF benefit amounts and 2026 federal poverty levels. See for example: U.S. Department of Health and Human Services Poverty Guidelines for 2026 to determine the amounts for varying federal poverty levels, Jan. 2026. New Jersey Department of Human Services, New Jersey State Plan for Temporary Assistance for Needy Families (TANF) FFY 2024 – FFY 2026, Schedule I and Schedule II, 2024

[13] Legal Services of New Jersey, New Jersey True Poverty Tracker: A Report on Populations Experiencing Deprivation in New Jersey, Sep. 2022.

[14] University of California, Davis, Center for Poverty and Inequality Research, What is “deep poverty”?, Oct. 30, 2025.

[15] Department of Human Services, Murphy Administration Boosts Payments for Families & Individuals in Need, Sep. 4, 2019. Holom-Trundy, B., Adjusting Work First New Jersey Eligibility Would Help Tackle Child Poverty, New Jersey Policy Perspective, Feb. 14, 2022. Holom-Trundy, B., Expand Anti-Poverty Programs to Help Families in Crisis, New Jersey Policy Perspective, Jan. 22, 2025.

[16] Holom-Trundy, B., Outdated and Ineffective: Why New Jersey Needs to Update Its Top Anti-Poverty Program, New Jersey Policy Perspective, May 22, 2025.

[17] NJ Department of Human Services, Current Program Statistics – December 2025, Table 1, Mar. 2026.

[18] Aguas, T., Census 2024: Economic Gains Bypass Many New Jersey Communities, New Jersey Policy Perspective, Oct. 21, 2025.

[19] Center on Budget and Policy Priorities, Trends in State TANF-to-Poverty Ratios, Oct. 1, 2025.

[20] Center on Budget and Policy Priorities, TANF State-by-State Fact Sheets – New Jersey, Oct. 1, 2025.

[21] NJPP analysis of ACNJ 1998 Kids Count data and Division of Family Development 2024 Current Program Statistics data, all years are for enrollment in June. Small Area Income and Poverty Estimates (SAIPE) data for poverty under age 18 for years 1997 and 2024

[22] Castro, R., Promoting Equal Opportunities for Children Living in Poverty, Appendix Table, New Jersey Policy Perspective, Apr. 2020. NJ Department of Human Services, Current Program Statistics – June 2019, Jan. 2026. NJ Department of Human Services, Current Program Statistics – June 2025, Jan. 2026. Aguas, T., Census 2024: Economic Gains Bypass Many New Jersey Communities, New Jersey Policy Perspective, Oct. 21, 2025.

[23] Administration for Children & Families, Characteristics and Financial Circumstances of TANF Recipients, Fiscal Year 2023, Table 10, Oct. 3, 2024. Aguas, T., Census 2024: Economic Gains Bypass Many New Jersey Communities, New Jersey Policy Perspective, Oct. 21, 2025.

[24] Covert, B., New Jersey, Birthplace of Welfare Family Caps, Has Finally Repealed Them, TalkPoverty, Oct. 16, 2020.

[25] Floyd, Ife, et al., TANF Policies Reflect Racist Legacy of Cash Assistance, Center on Budget and Policy Priorities, Aug. 4, 2021. Floyd, I., States Should Follow New Jersey: Repeal Racist “Family Cap”, Center on Budget and Policy Priorities, Oct. 14, 2020.

[26] Castro, R., TANF at 23: Reform is Necessary to Break the Cycle of Poverty, New Jersey Policy Perspective, Aug. 22, 2019. National Center for Children in Poverty, A 50-State Comparison of TANF Policy Settings Linked to Child and Family Protection, Mar. 24, 2025.  Holom-Trundy, B., Understaffed and Underfunded: Barriers to Effective Anti-Poverty Assistance, New Jersey Policy Perspective, Nov. 25, 2024.

[27] American Public Human Services Association, Seven Ways to Improve TANF and Help Families Advance, Aug. 22, 2022.

[28] NJ Division of Family Development, 2024 Quarterly Progress Reports, Work First New Jersey, Accessed Mar. 24, 2026.

[29] Castro, R., TANF at 23: Reform is Necessary to Break the Cycle of Poverty, New Jersey Policy Perspective, Aug. 22, 2019. National Center for Children in Poverty, A 50-State Comparison of TANF Policy Settings Linked to Child and Family Protection, Mar. 24, 2025.

[30] Aguas, T., What Could $0.43 Offer You?…NJ Minimum Wage Just Went Up!, Princeton Perspectives, Jan. 2026.

[31] NJPP analysis of New Jersey Office of Management and Budget, BUDGET IN BRIEF – Summary of Budget Recommendations FISCAL YEAR 2026, p. 95, Feb. 2025. Congressional Research Service, The Temporary Assistance for Needy Families (TANF) Block Grant: A Legislative History, Jan. 6, 2025.

[32] Center on Budget and Policy Priorities, New Jersey TANF Spending, Jan. 16, 2026.

[33] Azevedo-McCaffrey, D. and Aguas, T., Continued Increases in TANF Benefit Levels Are Critical to Helping Families Meet Their Needs and Thrive, Center on Budget and Policy Priorities, Feb. 26, 2025.

[34] Center on Budget and Policy Priorities, New Jersey TANF Spending, Jan. 16, 2026.

[35] National Center for Children in Poverty, A 50-State Comparison of TANF Policy Settings Linked to Child and Family Protection, Mar. 24, 2025.

[36] Holom-Trundy, B., Understaffed and Underfunded: Barriers to Effective Anti-Poverty Assistance, New Jersey Policy Perspective, Nov. 25, 2024.

[37] There is no recent published research examining New Jersey TANF participants’ experiences with WorkFirst NJ specifically. However, studies from other states offer insight into how participation rules and administrative processes can shape families’ ability to remain on the program. Qualitative research from Illinois documents that many TANF recipients experience the program as difficult to navigate, with complex work requirements and procedural hurdles contributing to case closures. While these findings do not describe New Jersey’s system, they illustrate broader patterns in how TANF’s design can create barriers for families. See for example: Heartland Alliance, Resigned to the Process: Barriers to Accessing and Maintaining TANF among Low-Income Families with Young Children in Illinois, 2022.

[38] Library of Congress, The Temporary Assistance for Needy Families (TANF) Work Standard and How States Met It, Feb. 18, 2026.

[39] Under Work First New Jersey rules, parents with infants under three months old may receive a temporary deferral from work participation requirements. After this period, parents are generally expected to engage in approved work activities unless they qualify for another exemption (such as a documented medical condition or caregiving need). These deferrals do not eliminate program obligations but temporarily pause work requirements during the postpartum period. See for example: Work First New Jersey, Work First New Jersey Handbook, Aug. 2019. Justia Regulations, NJ Admin Code 10:90-4.10,  Jun. 16, 2025.

Fool’s Gold: The Hidden Costs of AI Data Centers for New Jersey

Posted on by Alex Ambrose

Introduction

Robust, responsible economic development must ensure businesses bear the costs they create, protect the environment, and uphold sound fiscal policy so that state tax dollars do not subsidize private profits. Data centers and the technological products they support may seem exciting and new, but they also impose costs on local communities and the state as a whole. As with prior economic development booms, from warehouses to shopping malls, an accurate accounting of the hidden costs of these buildings can empower policymakers to make better decisions and protect residents.

Behind the promises of jobs and economic growth, the dramatic expansion of data centers has harmed states and communities: these facilities use large amounts of energy, do not deliver meaningful long-term benefits, and cause the state to lose money from subsidies and credits. The growth in artificial intelligence (AI) products has driven rapid growth in data centers, but that growth strains local communities and infrastructure.[1]

New Jersey residents and small businesses are already paying more for electricity because of data center energy consumption. Data centers were the main driver of the 20 percent jump in electric bills that New Jerseyans experienced in June 2025.[2] And with more data center demand pushing construction across the country, New Jersey will see increased exposure to the risks associated with data centers.

To address these hidden risks to the state’s communities and residents, utility costs, and fiscal stability, NJPP recommends the following:

  1. Create a standard definition of a data center for the purposes of state regulation.
  2. Build strong guardrails for data center companies around cost sharing, transparency, and energy resource requirements.
  3. Standardize energy load forecasting.
  4. Remove or restrict data center subsidies.

The Basics of Data Centers

When a user types a prompt into an AI tool, a data center’s computers use an enormous amount of computing power to generate the tool’s response. What may appear to the user to be magic has very real costs in electricity, water, and infrastructure. At its core, a data center is just a different kind of industrial or commercial facility, designed to maximize profits for its owners and operators. Understanding the costs data centers impose on communities and the reality of their operations can help policymakers develop laws and regulations that protect residents and the places they live.

What is a data center?

Simply put, a data center is a big room filled with computers. As more computing power is needed to conduct operations for artificial intelligence programs, more of these rooms are needed to keep up with demand, with more resource-intensive computers and all the infrastructure needed to run them, including electricity to power the computers and water for their cooling needs.[3] As a result, a medium-sized data center can consume more than 100 million gallons of water per year, roughly as much as a small town.[4]

Because definitions of a data center can include everything from a small server room to a huge warehouse, information on data centers can be difficult to obtain. Different states use different definitions of data centers for regulatory purposes. Some simply identify “large load customers,” defining a facility that needs a certain amount of energy (say, 100 megawatts) as a “large load customer,” without specifying that it must be a data center.[5] For certain tax exemptions, states may have different definitions, which might include specific industry codes, capital investment minimums, or jobs created.[6]

For the purposes of this report, NJPP uses a broad definition of “data centers” that includes a wide range of facilities designed to contain computing infrastructure. The rapid growth in data centers is driven by the computing demands of AI products, sometimes leading to the shorthand of “AI data centers” to describe newer, larger buildings.

Illustrated diagram of a data center

Where are data centers in New Jersey and where are they planned?

New Jersey currently has 48 data centers, with another 12 announced or under construction, according to Aterio, a research firm that tracks the industry.[7] Different publications and firms use different definitions for what constitutes a data center, and no universal database exists. Aterio’s count includes small, midsize, and “hyperscale” facilities categorized by power consumption and public-facing descriptions such as utility filings, public investor statements, and press releases.

Companies decide where to locate or “site” their facility based on a number of factors. Because data centers often require substantial space commitments, they tend to be located outside of denser urban or suburban areas, with new proposed sites in New Jersey in communities such as Vineland, Moorestown, and Clinton.[8] Companies also consider zoning, access to a high-quality network, and the ability of the utility to meet their energy needs; but one of the biggest factors is choosing a place where there are previously developed facilities.[9] This means data centers tend to be concentrated in one area, further straining local grids and communities. Loudoun County, Virginia has the highest concentration of data centers in the world, where new data centers are being constructed near schools, residential neighborhoods, and retirement communities, consuming enormous amounts of resources in the process.[10]

How much energy and water does a data center use?

Data centers use a significant amount of energy, but because of a lack of transparency in energy reporting, exact data is unavailable and the energy usage of data centers can vary widely. A typical large data center that focuses on AI uses as much energy as 100,000 households.[11] However, some larger ones that are currently under construction across the country could use 20 times that much energy.[12] In New Jersey, estimates project nearly 10 percent of New Jersey’s entire electrical usage will go to data centers by 2030, or the equivalent of the energy usage of the entire state of Rhode Island.[13]

In fact, in the next several years, data center energy consumption will grow four times faster than total consumption from all other sectors, and the United States is projected to be the global leader in that explosive growth.[14] According to New Jersey’s regional grid operator PJM, AI data centers accounted for nearly 70 percent of the increase in demand during the 2025/26 capacity auction — the same auction that resulted in a 20 percent increase in electric bills for New Jersey residents.[15]

Approximately 60 percent of the energy a data center uses goes to powering the servers, while the rest goes toward cooling systems.[16] These cooling systems demand large amounts of both electricity and water. In 2024, large AI data centers across the United States consumed about 14 billion gallons of water[17] — a number that could double by 2028.[18]

Precise water usage figures are difficult to verify because data center companies are not required to report them publicly. This lack of transparency is a problem for a state that has experienced several droughts in recent years, including the 2024-25 drought that resulted in crop losses and increased wildfire risk.[19] Any further strain on the state’s water resources could threaten its economic and environmental well-being.

What other costs do data centers impose on ratepayers?

Electricity rates are set by the utility providers in New Jersey and approved by the Board of Public Utilities.[20] Yet there are currently no mechanisms in place to protect everyday ratepayers, such as families and small businesses, from higher costs due to data center buildout. Experts find that despite utility companies saying they keep data center costs separate, these ratepayers are essentially subsidizing big tech companies’ data center projects through higher electricity bills.[21] Aside from the increase in electricity demand, data centers also often require upgrades to transmission infrastructure, and those costs are already being passed on to households and local businesses through increases in their electric bills.[22] If a data center company closes its facility, ratepayers can be left on the hook to pay for those upgrades without strong guardrails in place.

What kinds of jobs do data centers produce?

Data center construction, like any large building project, creates a short-term increase in construction jobs. But once the building is complete, relatively few jobs remain, as the data center is largely space for computers and their cooling and power infrastructure. The limited empirical research has shown no clear evidence of an association between data center development and local tech job creation.[23] Industry estimates place about 50 jobs in a 250,000 square-foot facility — roughly 5,000 square feet per job.[24] By comparison, warehouses generate one job for every 600 square feet, while offices provide one job for every 190.[25] A Brookings Institution report summarizes the existing research: data center development has produced mostly short-term construction jobs in recent years and relatively little long-term, high-value tech activity or large-scale employment.[26]

How Policymakers are Responding to Data Centers

As data center growth has rapidly accelerated, policymakers face a shifting landscape and have been slow to advance policies that address its rising costs. From electrical and water usage to economic development credits, the industry has outpaced policy constraints and regulation.

What makes data centers challenging for state and local policymakers?

Data centers are challenging for state and local policymakers in part because of a lack of transparency in the development process. One major issue is with predicting load growth, or how much electricity a region will need in the future. While it may seem that planning for higher energy use than is needed is a good thing, over-budgeting by too large a margin can artificially drive up costs and continue to increase ratepayer bills. Currently, load growth in New Jersey and surrounding states is predicted by each utility reporting to PJM how much energy it expects it will need in the future. However, this process is not standardized and utility companies often report projects at different stages of development.[27] The demand forecasts that PJM receives may be double- or even triple-counting data center projects because companies will often put in multiple bids for a single project and pull out of all but one once they have chosen their site.[28]

Forecasts through 2030 show demand six times higher than just a few years ago.[29] While there are several factors that contribute to this jump, including manufacturing and electrification, the main driver of this increase in expected demand is data centers.[30] Without a standard system that ensures large load projects like data centers are only counted once, forecasts will remain inflated, driving up costs further. And if policymakers continue to use new and existing oil, coal, and gas plants to meet demand that may never materialize, New Jersey could be locked into using these less reliable, more expensive, and more polluting power plants for decades to come.[31]

How do existing state, regional, and federal policies address AI data centers?

Recent advances in hardware have led to an explosion in the expected development of AI data centers.[32] AI requires dramatically more processing power than traditional computing, driving the skyrocketing demand. U.S. Department of Energy research projects up to 12 percent of total nationwide electricity going to data centers by 2028, or roughly five and a half times what New Jersey uses in a year.[33]

Lawmakers have been unable to keep pace with the rapid growth of data centers, and the regional grid operator PJM has failed to act to protect ratepayers.[34] During the December 2025 capacity auction, existing and planned resources fell short of the reserve needed for grid reliability.[35] This means that if nothing else changes, the region could soon face rolling blackouts on the hottest and coldest days of the year.

PJM recently attempted to adopt policies to address data centers through an expedited decision-making process, but could not secure enough votes on any single proposal.[36] Instead, the board issued a letter outlining six actions it plans to take; but the response falls short of what is needed to hold data centers accountable, protect ratepayers from future increases, and prevent further air pollution across the region.[37]

How do data centers affect environmental justice communities?

On top of higher utility costs, the increase in demand from data centers is delaying the transition to renewable energy, risking local resident health and climate goals. Decision makers, including PJM and the White House, are delaying closures of fossil fuel plants and considering reviving retired ones to meet growing demand.[38] More than half of all coal and gas plants in the PJM region are within a mile of an environmental justice community, which means residents there are not only facing higher bills, but continuing to breathe more polluted air than in other areas.[39]

Using a large generative AI model can produce as much air pollution as more than 10,000 round trips by car between Los Angeles and New York City — and a single model can draw power from multiple data centers.[40] Experts also found that in 2023, air pollution attributed to data centers in the United States caused about $6 billion in public health damages, and that number could increase up to $20 billion per year if lawmakers continue business as usual.[41] For comparison, vehicle emissions in 2016 alone caused $12 billion in health damages for New Jersey.[42] Any increase could be devastating to the health of every state resident.

Data centers have worsened health outcomes for surrounding communities. One facility outside the PJM region in Tennessee runs without pollution controls due to a federal loophole; local residents report that the increase in emissions has made their existing conditions, like asthma, even worse.[43] In New Jersey, a proposed data center in Vineland plans to use diesel backup generators, which would increase local air pollution in a community already suffering from worse health outcomes.[44] A 2022 report found that residents there experience asthma, heart disease, and lung cancer at rates higher than the state average — all conditions worsened by diesel exhaust.[45] Vineland residents have also reported ongoing noise from construction, which can cause permanent hearing damage.[46]

How are states subsidizing and supporting data center growth?

Seeking economic development, many states have rolled out corporate subsidy and tax benefit programs for data centers.

Most states have focused on reductions in sales taxes, particularly those with limited or no taxes on corporate profits. Other states have exemptions on electricity taxes, while others offer property tax reductions.[47] New Jersey’s economic development tax credit program provides tax benefits for data center construction.

The Next New Jersey program allows artificial intelligence or “AI-related” businesses to apply for tax credits of up to $250 million to cover construction, building, or employment-related costs, with a total cap of $500 million in credits.[48]

To define what qualifies as an “AI data center,” the law requires that a facility must handle AI tasks and lists the types of services the facility offers and the systems it houses — namely computing systems and the computers’ support infrastructure.[49] This definition captures a broad range of potential facilities, while not clarifying their size, electrical and water usage, and environmental impact.

Eligibility criteria include:

  • At least 50 percent of the business’s employees are engaged in “artificial intelligence-related activities” or 50 percent of the business’s revenues come from “artificial intelligence-related activities”;
  • At least $100 million in capital investment at the facility; and
  • At least 100 new full-time jobs in New Jersey (construction, building services, etc. may count, but only up to 50 percent of employment).[50]

 

In addition to Next New Jersey, data centers can qualify for subsidies that apply to all industries, such as the Emerge and Aspire economic development tax credit programs, which create incentives for businesses to locate in New Jersey.[51]

How much do data center subsidies cost states?

As the data center industry has grown, so have the costs of these subsidies for states. Incentives that seem small-scale can quickly balloon as the boom in construction clusters in certain areas, leading to substantial budget instability.[52] At least 10 states have lost more than $100 million in data center subsidies.[53] Virginia is a dramatic example, with its sales tax exemption costing the state $1.6 billion[54] — more than 20 percent of its total sales tax revenue of $7.6 billion.[55] Illinois has seen similar losses, with nearly $1 billion drained from its state budget.[56]

Because of these rapidly rising costs, some states have begun pulling back their subsidies for data centers, including Minnesota, which removed its electricity sales tax exemption.[57]

Currently, New Jersey’s data center tax credit does not anticipate revenue costs in Fiscal Year 2027, though the program is relatively new and has not yet issued any credits.[58]

Solutions for Policymakers to Protect New Jerseyans

The problems data centers create are not going away, and there are many lessons that both New Jersey and PJM can learn from other states and regions. While experts predict future demand could continue to explode and drive up costs, good policy could be the difference between modest increases with no additional pollution and higher costs with higher pollution.

The following are proposals to mitigate the hidden costs of data centers:

1. Create a standard definition of a data center for the purposes of regulation.

New Jersey’s current definition of an “AI data center” for the purposes of administering the Next New Jersey tax credit program does not effectively capture the broad range of facilities, nor does it assist in regulation of their electrical, water, or environmental costs to communities.[59] NJPP recommends creating a standard statutory definition of a data center for specific regulatory purposes (such as electrical and water usage) to ensure that regulations are consistently applied to this class of buildings and the costs associated with them.

2. Build strong guardrails for data center companies around cost sharing, transparency, and energy resource requirements.

Data centers are driving up electricity prices for families and small businesses, and lawmakers can require them to pay more to offset those increases — but as it stands right now, there are no safeguards in place. At the end of his term, Gov. Murphy refused to sign a bill that would have created a new rate for data centers, charging them more for their energy usage to help offset the increases on household and small business energy bills.[60] New Jersey would not be the first state to do this – at least 33 other states have either proposed or implemented different rate structures for large load customers including data centers.[61] In fact, Minnesota enacted a fee on data centers with funds going towards energy efficiency for low-income residents.[62] A rate structure such as this ensures that families and small businesses are not paying more for their electricity and instead puts the cost on the companies that are causing rates to increase. It also incentivizes energy efficiency and other innovative ways to reduce energy use, benefiting both the data center company and the state’s residents.

Second, New Jersey can join other states in requiring data centers to report their energy and water usage to the state’s Board of Public Utilities. By requiring more transparency, both lawmakers and community members can make informed decisions about future policy.

Finally, lawmakers can require data center companies to bring their own generation, specifically clean energy, if they want to build data centers in the state. Other states have learned hard lessons about what happens when a data center company is left unregulated and can run polluting energy sources unchecked, as in Tennessee, where gas turbine pollution has been a problem. New Jersey can set the standard now to protect energy affordability and cleaner air in the future.

3. Standardize load forecasting.

Because AI data centers are an emerging technology, and the idea of large load projects “shopping around” in multiple jurisdictions is a new problem, policies have not yet standardized how utilities and states report their future energy needs to entities such as PJM. Standardizing load forecasting can be done at the state level; it is even more powerful at the regional level, so each utility uses the same protocols to report its energy needs. While PJM has failed to address this issue, the BPU can work with PJM and utilities to reduce duplication of projects and ensure load forecasting is as accurate as possible in New Jersey. This will also reduce the need to keep older coal, oil, and gas plants online, protecting New Jerseyans and the entire PJM region from more air pollution. Additionally, the state and PJM can consider policies that will ensure any necessary blackouts during peak energy days prioritize families and small businesses over data centers.

4. Remove or restrict data center subsidies.

As the state approaches a substantial budget gap, programs that provide subsidies to private corporations need reevaluation.[63] Many states are already reevaluating these subsidies, and New Jersey’s relatively new program has yet to issue an approved credit, providing time to reduce its cost before substantial revenue losses occur.[64] Given the substantial hidden costs of these centers, reducing these incentives or increasing restrictions on their use may help alleviate the burden on communities and the state budget. National experts also have proposed guardrails in the absence of full repeal that can limit the negative impact of these subsidies on communities and their budgets, including lowering the duration and amount of subsidies, prohibiting non-disclosure agreements, requiring public listing of all recipients and applicants, and requiring community benefits agreements in line with other tax incentive programs.[65]

Conclusion

Because of AI data centers, communities are facing higher costs, a more unreliable grid, more pollution, and a lack of transparency that makes holding these companies accountable nearly impossible. New Jersey’s families and small businesses are already paying to subsidize them through higher electric bills. But these problems can be solved. The future of New Jersey’s affordable clean energy, along with its economic and environmental well-being, hinges on lawmakers prioritizing everyday New Jerseyans over for-profit technology companies. The path forward is clear: stronger rules, cleaner energy, and a commitment to putting people before corporate profits.

End Notes

[1] Leppert, R. What we know about energy use at U.S. data centers amid the AI boom. Pew Research Center. Oct. 24, 2025.

[2] Chavin, Sabine, et al. Tackling the PJM Cost Crisis. Evergreen Collaborative. Apr. 15, 2025. p.2.

[3] Metz, C. et al. “How A.I. Is Changing the Way the World Builds Computers,” New York Times. Mar. 16, 2025.

[4] Yanez-Barnuevo, M. Data Centers and Water Consumption. Environmental and Energy Study Institute. June 25, 2025.

[5] Utah Code Sec. 54-26-101 (2025).

[6] Compare N.C. Stat. Sec. 105-164.3(47) (2025) (defining data center as “a facility that provides infrastructure for hosting or data processing services and that has power and cooling systems that are created and maintained to be concurrently maintainable and to include redundant capacity components and multiple distribution paths serving the computer equipment at the facility”) with Ga. Rules and Regulations Rule 560-12-2-.117 (2025) (requiring that a “high-technology data center” “power, cool, secure, and connect” computer equipment, as well as certain investment thresholds).

[7] Aterio. US Data Centers Dashboard. Feb. 2026.

[8] FracTracker Alliance. Data Centers Identified by FracTracker Alliance. 2025.

[9] Leppert, R. What we know about energy use at U.S. data centers amid the AI boom. Pew Research Center. Oct. 24, 2025.

[10] Chen, A. “A.I. Is on the Rise, and So Is the Environmental Impact of the Data Centers That Drive It.” Smithsonian Magazine. Sept. 29, 2025.

[11] Copley, M. “Data centers are booming. But there are big energy and environmental risks.” NPR. Oct. 14, 2025.

[12] Leppert, R. What we know about energy use at U.S. data centers amid the AI boom. Pew Research Center. Oct. 24, 2025.

[13] Blanford, G. et al. Powering Intelligence 2026: Updated Scenarios of U.S. Data Center Electricity Use and Power Strategies. Electric Power Research Institute. 2026.

NJPP analysis of U.S. EIA data. See table C1. p.3.

[14] Ibid. See “Energy Demand from AI”

[15] Ambrose, A. Why Are New Jersey’s Electricity Bills Going Up, and What Does PJM Have to Do With It? New Jersey Policy Perspective. (2025).

[16] Leppert, R. What we know about energy use at U.S. data centers amid the AI boom. Pew Research Center. Oct. 24, 2025.

[17] Leppert, R. What we know about energy use at U.S. data centers amid the AI boom. Pew Research Center. Oct. 24, 2025.

[18] Ibid.

[19] National Integrated Drought Information System. New Jersey conditions. National Oceanic and Atmospheric Administration Accessed March 2026.

[20] New Jersey Board of Public Utilities. About NJBPU. Access Mar. 2026.

[21] Martin, E. and Peskoe, A. Extracting Profits from the Public: How Utility Ratepayers Are Paying for Big Tech’s Power. p.1.

[22] Ibid. p.15.

[23] Gargano, A. & Giacoletti, M. Subsidizing the Cloud: U.S. State Incentives to Data Centers. SSRN Working Paper No. 5881105. Feb. 2026. P. 39.

[24] Joint Legislative Audit and Review Commission. Report to the Governor and the General Assembly of Virginia: Data Centers in Virginia, 2024. Dec. 9, 2024. P. i.

[25] Fuller, S. NAIOP Research Foundation. Economic Impacts of Commercial Real Estate, 2021 Edition. 2021. P. 17.

[26] Goetzel, D. et al. Turning the data center boom into long-term, local prosperity. Brookings Institution. Feb. 5, 2026.

[27] National Association of Regulatory Utility Commissioners. Forecasting Load Growth: Assumptions and Risks, February 10, 2025. p.2.

[28] Ibid.

[29] Wilson, J.D. et al. Power Demand Forecasts Revised Up for Third Year Running, Led by Data Centers. Grid Strategies. Nov. 2025. p.3.

[30] Ibid.

[31] Goldsmith, I. and Byrum, Z. Powering the US Data Center Boom: Why Forecasting Can Be So Tricky. World Resources Institute. Sept. 17, 2025.

[32] Shehabi, A. et al. 2024 United States Data Center Energy

Usage Report. Berkeley Lab, Energy Analysis & Environmental Impacts Division. December 2024. P. 6.

[33] Shehabi, A. et al. 2024 United States Data Center Energy

NJPP analysis of U.S. EIA data.

Usage Report. Berkeley Lab, Energy Analysis & Environmental Impacts Division. December 2024. P. 5-6.

[34] Ambrose, A. Why Are New Jersey’s Electricity Bills Going Up, and What Does PJM Have to Do With It? New Jersey Policy Perspective. (2025).

[35] Hanawa, A. PJM’s 2027/2028 Base Residual Auction results: demand response prices climb for the third straight year. Enel North America. Dec. 22, 2025.

[36] Howland, E. “PJM stakeholders fail to agree on data center interconnection rules.” Utility Dive. Nov. 20, 2025.

Brandon, E. CUB Q&A: PJM’s Critical Issue Fast Path (CIFP) Policy Proposals on Data Centers. Citizens Utility Board. Nov. 13, 2025.

[37] Mills. D. Board Decisional Letter on Critical Issue Fast Path – Large Load Additions. PJM Interconnection, LLC. Jan. 16, 2026;

Yelda, R. PJM Board Announces Final Proposal to Address Data Center Demand. NRDC. Jan. 16, 2026.

[38] Yelda, R. PJM Board Announces Final Proposal to Address Data Center Demand. NRDC. Jan. 16, 2026.

Ebbs, S. Trump’s cozy deal with Big Tech promotes empty promises to tackle energy affordability. Southern Environmental Law Center. Mar. 4, 2026.

[39] Castigliego, J.R., et al. PJM’s Capacity Market: Clearing Prices, Power Plants, and Environmental Justice. Oct. 2021. p.i.

[40] Han, Y. et al. The Unpaid Toll: Quantifying and Addressing the Public Health Impact of Data Centers. Cornell University.

[41] Ibid.

[42] University of North Carolina Institute for the Environment. New study identifies leading source of health damages from vehicle pollution in 12 states and Washington, D.C. Jun. 8, 2021.

[43] Wittenberg, A. ‘How come I can’t breathe?’: Musk’s data company draws a backlash in Memphis. Politico. May 6, 2025.

[44] New Jersey Environmental Justice Alliance. Vineland Case Study. Accessed March 2026.

New Jersey Department of Health. Healthy Community Planning Report, Vineland, Cumberland County. 2022. P.6.

[45] New Jersey Department of Health. Healthy Community Planning Report, Vineland, Cumberland County. 2022. P.6.

U.S. Environmental Protection Agency. Learn About Impacts of Diesel Exhaust and the Diesel Emissions Reduction Act. Accessed Mar. 2026.

[46] Corin, C. Residents raise concerns about humming noise near South Jersey data center. 6abc. Mar. 12, 2026.

Pavlinich, E.J. The Dangers of Data Centers. Environmental Health Project. Feb. 27, 2026.

[47] N.C. Gen. Stat. § 105-164.13(55) (electricity exemptions); Fitzgerald, M. “Data center tax breaks are on the chopping block in some states.” Stateline. Feb. 24, 2026.

[48] P.L. 2024, c.49 (“a scalable facility specifically to handle the demanding computational needs of artificial intelligence applications, designed for tasks like machine learning training, deep learning algorithms, and complex data analysis utilizing purpose-built processing units, whose services are the storage, management, and processing of digital data; that is used to house: computer and network systems, including, but not limited to, associated components such as servers, network equipment and appliances, telecommunications, and data storage systems . . . .”)

[49] N.J. Annotated Code Sec. 19:31CC-1.2 (2026).

[50] P.L. 2024, c.49

[51] NJ Economic Development Authority. Emerge Program: At a Glance. Aug. 2025; NJ Economic Development Authority. Aspire Overview. Feb. 2025.

[52] LeRoy G. & Tarczynska, K. Cloudy with a Loss of Spending Control: How Data Centers Are Endangering State Budgets. Good Jobs First. Feb. 2025.

[53] LeRoy G. & Tarczynska, K. Cloudy with a Loss of Spending Control: How Data Centers Are Endangering State Budgets. Good Jobs First. Feb. 2025.

[54] Report of the Comptroller to the Governor of Virginia. An Annual Comprehensive Financial Report For the Fiscal Year Ended June 30, 2025. Dec. 15, 2025. P. 191.

[55] Report of the Comptroller to the Governor of Virginia. An Annual Comprehensive Financial Report For the Fiscal Year Ended June 30, 2025. Dec. 15, 2025. P. 31

[56] Illinois Department of Commerce & Economic Opportunity. Data Center Investment Program: 2024 Annual Report. 2025.

[57] Griffith, M. “Minnesota lawmakers extend tax breaks for Big Tech data centers.” Minnesota Reformer. Jun. 11, 2025.

[58] State of New Jersey. Tax Expenditure Report Fiscal Year 2027. Mar. 10, 2026. Pp. 11, 85.

[59] N.J. Annotated Code Sec. 19:31CC-1.2 (2026).

[60] Office of Governor Phil Murphy. Governor Murphy Takes Action on Legislation. Jan. 20, 2026.

[61] Smart Electric Power Alliance. Database of Emerging Large-Load Tariffs. Accessed March 2026.

[62] M.N. HF 16. Data center regulatory bill. 94th Legislature. Enacted Jun. 14, 2025.

[63] Biryukov, N. “Gov. Sherrill provides grim outlook on state finances ahead of budget speech.” New Jersey Monitor. Feb. 26, 2026.

[64] Fitzgerald, M. “Data center tax breaks are on the chopping block in some states.” Stateline. Feb. 24, 2026.

[65] Tarczynska, K. Data Centers: Key Reforms for State Subsidy Legislation. Good Jobs First. Sept. 23, 2025.

How Gov. Sherrill’s Fiscal Year 2027 Budget Measures Up

Posted on by Tonanziht Aguas

Before the Governor’s budget address for Fiscal Year 2027, New Jersey Policy Perspective produced a preview of the proposal, identifying key priorities to advance economic, social, and racial justice.

The report outlines three core priorities for the FY 2027 budget:

  • Guard fiscal responsibility, including reducing the multi-billion-dollar structural deficit and raising revenue from the wealthy.
  • Open the door to opportunity by protecting immigrants, expanding family tax credits, and improving health coverage.
  • Protect critical investments, including clean energy infrastructure and NJ Transit funding, to help make life more affordable in New Jersey.


With the release of the governor’s Budget in Brief, the budget met some key benchmarks but fell short elsewhere.

(All citations refer to the Fiscal Year 2027 Budget in Brief unless otherwise noted.)

NJPP FY27 Budget Priority

Was it included in the budget?

Maintaining cash reserves and reducing deficits  Yes. A structural deficit of $1.67 billion remains, substantially lower than original projections of more than $3 billion (BIB p. 8). The FY 2027 budget proposal recognizes the need for long-term solutions to close the structural deficit, including nearly $2 billion in proposed reductions in expenditures and $700 million in additional revenue (BIB pp. 4, 48, 50-53). Projected cash reserves will be reduced to $5.4 billion from $7.3 billion at the end of this fiscal year (BIB p. 8).
Fully funding pensions and schools  Yes. Governor Sherrill continues Governor Murphy’s commitment to fully funding the pension and school funding formulas (BIB pp. 15, 11). School funding changes include a six percent cap on funding increases, and a three percent cap on decreases (BIB p. 19).
Raising new revenues from the wealthy  Partially Included. Governor Sherrill’s budget includes new revenues from closing loopholes in corporate and business taxes (BIB pp. 48, 50-53). These increases are a good first step, but more revenue remains untapped from big corporations and wealthy individuals.
Adjusting Stay NJ to control costs  Yes. The budget proposal includes changes to Stay NJ that reduce the income cap from $500,000 to $250,000 and reduce the maximum benefit from $6,500 to $4,000, saving more than $500 million that would otherwise go to wealthier homeowners (BIB pp. 11, 59).
Services for immigrants  Partially included. The budget proposes continued funding for Cover All Kids, which provides health insurance for children regardless of immigration status (BIB p. 26). It also includes continued funding for language access, deportation defense, and the Office of New Americans.
Expanding and improving family tax credits  No. The Governor’s budget maintains the Child Tax Credit and Earned Income Tax Credit at current eligibility and benefit amounts (BIB p. 5).
Increasing the WorkFirst NJ grant  No. The budget proposal does not increase the grant amount for very-low income families receiving WorkFirst New Jersey, despite the amount being frozen for more than seven years of high inflation.
Expanding affordable insurance options  No. While current health care options are maintained, the budget includes no additional coverage programs or affordability support to address lost federal subsidies on the GetCovered NJ marketplace or residents who lose Medicaid coverage due to work requirements beginning in 2027 (BIB pp. 26-27).
Reducing or eliminating costs for people involved in the criminal legal system  No. The budget does not propose funding to reduce or eliminate the cost of prison communication fees, municipal public defenders, or other burdens placed on families as a result of the criminal legal system.
Preserving Clean Energy Fund and RGGI funding for clean energy infrastructure  No. The budget continues to raid the Clean Energy Fund at similar levels to the FY 2026 budget, diverting money for energy affordability and energy infrastructure towards both the general fund and filling NJ Transit budget holes (BIB pp. 74, 81). No information was provided about Regional Greenhouse Gas Initiative funding.
Maintaining the Corporate Transit Fee and committing it to transit  Partially included. The budget continues to dedicate the Corporate Transit Fee (CTF) to transit, and while it appears the state subsidy for NJ Transit has increased, this increase offsets a shortfall in CTF (BIB p. 40). The overall state budget allocation for NJ Transit remains at a low level, similar to previous years.

With only the Budget in Brief available at the moment, more detailed analysis will depend on the full budget details. Some programs mentioned in the budget address do not yet have specific revenues or spending items associated with them, such as the Governor’s proposed utility affordability initiative. Additionally, the proposed $2 billion in cuts may fall on communities or programs in need. More detail is needed to identify which programs will be affected.

The Governor’s budget provides an encouraging start toward a sustainable fiscal future. But spending cuts alone cannot protect residents or strengthen state investments that communities depend on. Building a stronger New Jersey will require stronger revenues, especially from asking wealthy individuals and large corporations to contribute more through a fair tax system. NJPP looks forward to a final Fiscal Year 2027 budget that better supports working families looking for opportunity, while ensuring the wealthy and powerful pay their fair share.

What to Look for in the New Jersey Budget for Fiscal Year 2027

Posted on by Peter Chen

How NJPP will evaluate Governor Sherrill’s first budget proposal

As Governor Mikie Sherrill prepares her first budget, New Jersey faces economic and budgetary headwinds, including:

  • increased costs for housing, utilities, and health care for residents,
  • instability and costs shifting from the federal government, and
  • cost pressures on government services, notably employee health care costs.[i]

 

New Jersey continues to face significant economic challenges. One in nine children in the state live in poverty, and many households face rising costs for housing, health care, and other necessities. The Fiscal Year (FY) 2027 budget will shape the state’s response and determine how much support residents receive.[ii]

As the Governor already laid out in a pre-budget press conference on February 26, the state begins the FY 2027 budget process with notable fiscal constraints.[iii] New Jersey faces an existing $1.5 billion structural deficit, along with growing cost pressures in future years, including expanding costs for the Stay NJ program and looming federal cuts.[iv] Without additional revenues, these constraints will limit the scope of new investments in the FY 2027 budget.

In her inaugural address, Governor Sherrill pledged to “open doors to opportunity across our state.” The Governor has emphasized the need to address structural budget gaps and strengthen long-term fiscal planning.[v] The FY 2027 budget will require difficult trade-offs between expanding affordability for low- and moderate-income residents, maintaining essential services, and ensuring fiscal stability and sufficient revenues to fund those services.

The benchmarks below outline the criteria NJPP will use to evaluate how well the Governor’s budget addresses these economic pressures and fiscal challenges while aligning with the values of expanding opportunity for all.

Guard Fiscal Responsibility

Maintaining cash reserves and reducing deficits

The state’s best defense against economic instability is robust cash reserves to deploy during a recession or unanticipated federal cuts.[vi] The state’s cash reserves are currently reduced by the roughly $1.5 billion structural deficit.[vii] Given unpredictable federal actions, maintaining the state’s savings can ensure that funding for programs such as child care, transportation, and health insurance remains predictable and stable. Dipping into the state’s savings to patch a budget hole would make the state more vulnerable should recession or further federal cuts arrive.

Fully funding pensions and schools

Governor Sherrill will inherit Governor Murphy’s legacy of a fully funded pension and school funding formula, which raised the state’s credit rating and strengthened fiscal stability.[viii] Governor Sherrill’s budget should maintain the state’s existing commitments to retirees and its nationally recognized public school system.

Raising new revenues from the wealthy

The structural deficit means the state has less revenue than it commits to investments and programs. Addressing the affordability crisis in New Jersey will require new revenue, and the Governor’s budget proposal should ask the wealthiest individuals and corporations to pay their fair share.[ix] While middle-class and working-class families struggle with daily costs, the wealth of the world’s wealthiest individuals and corporations has continued to increase, even as they receive disproportionate benefits from the 2025 federal tax bill.[x]

Adjusting Stay NJ to control costs

The cost of the Stay NJ subsidy for homeowners age 65 and over will grow this year by nearly $1 billion.[xi] Reducing the income cap from $500,000 and reducing the maximum benefit from $6,500 would help ensure that only seniors at risk of housing insecurity receive benefits.[xii] Without these changes, program costs could expand the structural deficit further.

Open the Door to Opportunity

Protecting immigrants

As federal attacks on immigrants increase, preserving funding for New Jersey’s programs assisting its immigrant residents is increasingly important. Keeping the door of opportunity open for New Jersey’s immigrant population, who make up more than 1 in 5 residents,[xiii] requires sustained funding for critical programs, including:

  • Cover All Kids health insurance coverage for all children regardless of immigration status
  • Detention and deportation defense legal assistance
  • Legal representation for children and youth, and
  • Office of New Americans coordination to connect immigrant residents to services such as child care and job training.

Expanding and improving family tax credits

One tool to improve family affordability in New Jersey was included in Governor Sherrill’s campaign platform: expanding the Child Tax Credit and Earned Income Tax Credit to put more money in family pockets.[xiv] Providing more money to families directly can help them address needs and cover household costs. Expanding eligibility to more children and increasing credit amounts for recipients will build on these successful programs and bring opportunity to more families across the state.[xv]

Increasing the WorkFirst NJ grant

The state’s high cost of living hits hardest for its lowest-income residents. Yet grants from the state’s cash assistance program, WorkFirst New Jersey, total less than $6,800 for a family of three annually.[xvi] Put another way, a 65-year-old dentist with a $450,000 salary could receive almost as much in state assistance through Stay NJ ($6,500) as a single mom with two kids earning $15,000 as a janitor through WorkFirst New Jersey. The budget should increase grant levels and establish an automatic adjustment that aligns with New Jersey’s actual cost of living.

Expanding affordable insurance options

Federal work requirements for Medicaid, coupled with the loss of Affordable Care Act subsidies for people purchasing health insurance on the state exchange, could leave hundreds of thousands of residents uninsured.[xvii] New Jersey should not reverse its decade of progress in reducing the number of uninsured residents.[xviii] The budget should include funding to expand coverage options for residents left behind by federal cuts, including:

  • Developing a buy-in option for NJ FamilyCare plans on the exchange with subsidized premiums,
  • Expanding the state’s existing subsidy program on the GetCovered NJ marketplace to partially replace subsidies lost from the federal level, and
  • Fully funding existing coverage expansion programs such as Cover All Kids.

Reducing or eliminating costs for people involved in the criminal legal system

New Jersey has made progress in reducing fines and fees across the criminal legal system, but more can be done to reduce the financial harm to people who interact with courts and law enforcement. Many of these fees are counterproductive, such as fees for municipal public defenders and the high costs to communicate with people in incarceration.[xix] Ending these fees can lift burdens on people involved in criminal legal proceedings, with relatively little cost to the state budget.

Protect Critical Investments

Preserving Clean Energy Fund and RGGI funding for clean energy infrastructure

Governor Sherrill has proposed ambitious targets for expanding solar power, storage, and clean energy production in the state, with a focus on reducing utility bills.[xx] Achieving these goals requires preserving dedicated funding for building clean energy infrastructure, such as the Clean Energy Fund and Regional Greenhouse Gas Initiative funds.[xxi] These funds support the development of new clean energy projects and increase energy efficiency, reducing costs in the medium and long term. Redirecting these funds to pay for short-term utility relief would undermine long-term affordability.

Maintaining the Corporate Transit Fee and committing it to transit

The state’s landmark Corporate Transit Fee provided New Jersey Transit with a dedicated revenue source for the first time in its history, ensuring that very large corporations pay for the infrastructure that generates their profits.[xxii] This money is not constitutionally dedicated to New Jersey Transit, and it could be redirected to patch other budget holes. Additionally, the state subsidy for NJ Transit has consistently fallen over the past few budgets, leaving the agency with less funding.[xxiii] The Governor’s budget should increase the state subsidy as well as preserve the Corporate Transit Fee’s dedication for the state’s transit system.

What We Want to Learn More About

Utility affordability

The Governor has signaled her commitment to reducing utility bills for New Jerseyans. How the state will achieve this goal is not yet clear, and the budget proposal will reveal whether state funding will pay directly for ratepayer relief or invest in clean energy and energy efficiency to make energy more affordable. As noted above, it is critical that short-term funding to reduce utility bills not come from long-term investments in energy infrastructure.

Addressing lost federal funding

The major uncertainty facing this budget is the federal government’s chaotic and unpredictable funding decisions. States already face administrative costs being shifted onto them by the HR 1 federal tax bill.[xxiv] Now, New Jersey must also contend with refusals to release funding that has already been approved, ranging from the child care system to the Gateway Tunnel.[xxv] The state budget may need to include contingency funds to replace federal funds that are frozen or delayed due to litigation.

End Notes

[i] National Low Income Housing Coalition. Out of Reach Report: New Jersey. 2025; Ambrose, A. Why Are New Jersey’s Electricity Bills Going Up, and What Does PJM Have to Do With It? New Jersey Policy Perspective. May 29, 2025; New Jersey Department of Health, New Reports Reveal the Complexity of New Jersey’s Rising Health Care Costs, Jan. 9, 2026; Chen, P. Five Budget Time Bombs Facing the Next Governor. New Jersey Policy Perspective. Jan. 15, 2026.

[ii] Aguas, T. Census 2024: Economic Gains Bypass Many New Jersey Communities. New Jersey Policy Perspective. Oct. 21, 2025.

[iii] Biryukov, N. “Gov. Sherrill provides grim outlook on state finances ahead of budget speech.” New Jersey Monitor. Feb. 26, 2026.

[iv] Chen, P. Five Budget Time Bombs Facing the Next Governor. New Jersey Policy Perspective. Jan. 15, 2026.

[v] Johnson, B. “N.J. Gov. Mikie Sherrill talks with us about Trump, ICE, spending, and more | Mikie’s World.” NJ Advance Media. Jan. 31, 2026.

[vi] Chen, P. “Best Defense Against Federal Chaos? A Bigger Savings Account.” New Jersey Globe. Jun. 18, 2025.

[vii] New Jersey Legislature. FY 2026 Appropriations Act Scoresheet. July 2, 2025.

[viii] Biryukov, N. “S&P gives NJ third credit rating increase under Governor Murphy.” New Jersey Monitor. Aug. 12, 2025.

[ix] Chen, P. Fair and Square: Changing New Jersey’s Tax Code to Promote Equity and Fiscal Responsibility. New Jersey Policy Perspective. Nov. 14, 2024.

[x] Husak, C. 7 Ways the Big Beautiful Bill Cuts Taxes for the Rich. Center for American Progress. Nov. 20, 2025. Bovino, B.A., Schoeppner, M. The K-Economy in 2026: Same story, new amplifiers. US Bank Economic Commentary. Jan. 7, 2026.

[xi] Chen, P. Five Budget Time Bombs Facing the Next Governor. New Jersey Policy Perspective. Jan. 15, 2026.

[xii] Chen, P. Course Correction: Preserving Senior Housing Affordability While Cutting Costs. New Jersey Policy Perspective. Jun 17, 2025.

[xiii] U.S. Census Bureau. “Selected Social Characteristics in the United States.” American Community Survey, ACS 5-Year Estimates Data Profiles, Table DP02, . Accessed on 1 Feb 2026.

[xiv] Mikie Sherrill for New Jersey. The Affordability Agenda: Lowering costs and building opportunity for New Jersey Families. Oct. 2, 2025. P. 5. (PDF on file with author)

[xv] Chen, P. Boost Family Tax Credits to Boost Affordability. New Jersey Policy Perspective. Feb. 5, 2025.

[xvi] Holom-Trundy, B. Outdated and Ineffective: Why New Jersey Needs to Update Its Top Anti-Poverty Program. New Jersey Policy Perspective. May 22, 2024.

[xvii] Murphy, N. et al. The One Big Beautiful Bill Act Will Increase the Number of Americans Without Health Coverage in Every State and Congressional District. Center for American Progress. Sep. 5, 2025. Tbl. 1.

[xviii] Holom-Trundy, B. Mind the Gap: Keeping New Jerseyans Covered in the Face of Federal Cuts. New Jersey Policy Perspective. February 6, 2026.

[xix] Ubel, M. End Predatory Prison Communication Fees. New Jersey Policy Perspective. Jan. 15, 2025.

[xx] Phillips, S. “N.J. Gov. Mikie Sherrill issues state of emergency on energy costs: Here’s what to know.” WHYY News. Jan. 23, 2026.

[xxi] Ambrose, A. Stop the Raids: The Clean Energy Fund Should Fund Clean Energy. New Jersey Policy Perspective. Jan. 12, 2023.

[xxii] Ambrose, A. Corporate Transit Fee Should Only Go to NJ Transit. New Jersey Policy Perspective. Jan. 28, 2025.

[xxiii] Ambrose, A. & Chen, P. Getting Back on Track: Fully Fund NJ Transit by Taxing Big Corporations. New Jersey Policy Perspective. Sep. 27, 2023.

[xxiv] Bergh, K. & Rosenbaum, D. Congressional Delay of SNAP Cost Shift Urgently Needed to Protect Food Assistance for Low-Income Families. Center on Budget and Policy Priorities. Jan. 8, 2026.

[xxv] Higgs, L. “U.S. Appeals Court orders Trump administration to release Gateway funds.” NJ Advance Media. Feb. 12, 2026; Montague, Z. & Kim, M. “Judge Blocks Trump Officials From Freezing Billions in Social Services Funds.” New York Times. Jan. 9, 2026.

Mind the Gap: Keeping New Jerseyans Covered in the Face of Federal Cuts

Posted on by Brittany Holom-Trundy

More than 727,000 New Jerseyans — roughly 1 in 13 residents — face daily life without health insurance.[1] That number is about to grow dramatically.

Congress is stripping coverage from hundreds of thousands more residents by eliminating subsidies, imposing new Medicaid work requirements, and creating unnecessary paperwork barriers.[2] These actions will reverse a decade of progress in expanding health coverage and leave working families without access to medical care.

Health insurance is not optional for a thriving New Jersey. Coverage reduces debt, improves health outcomes, and allows families to plan for their futures.[3] It improves public health through preventive care and reduces costs for hospitals and the state.[4] Yet continued gaps in coverage options and rising costs keep quality health coverage out of reach for many working families.

Without immediate state action to counter federal cuts, hundreds of thousands more New Jerseyans will lose coverage. State leaders must act now to protect residents by providing increased financial assistance, expanding coverage options, and standardizing outreach across counties.

Congress Is Stripping Coverage Through Four Major Actions

 Through the recently enacted "One Big Beautiful Bill Act" (H.R. 1), federal lawmakers are dismantling health coverage supports with actions that will devastate New Jersey families. These actions will strip coverage from working people, increase medical debt, and push families into crisis, directly contradicting the hard-won lessons of the COVID-19 pandemic about the importance of accessible, affordable health care.[5]

Enhanced subsidies have expired. Congress allowed enhanced federal subsidies on health insurance marketplaces to expire, pulling $500 million in assistance out of New Jersey residents alone.[6] Without these subsidies, many working families will no longer be able to afford marketplace plans through GetCovered NJ.

New work requirements will kick eligible people off coverage. Starting in 2027, federal law will require adult Medicaid enrollees ages 19 to 64 to complete 80 hours of work or community service each month — or lose coverage.[7] Evidence from Arkansas shows that work requirements don’t increase employment, they cause mass coverage losses because people cannot navigate complex reporting systems. New Jersey families will lose coverage not because they are ineligible, but because paperwork barriers block access to care.[8]

Increased paperwork requirements create barriers to coverage. Adults enrolled through Medicaid expansion must now submit paperwork proving they still qualify every six months instead of once a year.[9] This will cause eligible people to lose coverage simply because they miss paperwork deadlines. Recent coverage losses when pandemic protections ended revealed that thousands of New Jerseyans lost coverage not because they were ineligible but because they could not navigate the system.[10]

Immigrant coverage is being eliminated. Federal lawmakers are eliminating affordable coverage options that immigrants previously relied on through provisions of H.R. 1, the “One Big Beautiful Bill Act.”[11] This will increase the already severe barriers that immigrant residents face in accessing health coverage.

Impact on New Jersey

 These federal actions threaten to:

  • Strip coverage from hundreds of thousands of residents
  • Eliminate $500 million in marketplace subsidies
  • Create paperwork barriers that will cause massive coverage losses among eligible Medicaid enrollees
  • Further increase the uninsured rate among immigrant communities already facing the highest barriers

 

With federal support disappearing, state leaders must stabilize access and protect residents and their futures.

Working Families and Immigrants Face the Highest Barriers

Gaps in the health care system leave hundreds of thousands of New Jerseyans without coverage. Eligibility limits, bureaucratic barriers, and lack of information about programs prevent many residents from enrolling in coverage they need and can afford.[12]

Most Uninsured New Jerseyans Work — But Employers Don't Provide Coverage

Most uninsured New Jerseyans have jobs but their employers do not provide health coverage. They work as retail cashiers, farm workers, construction workers, and social service workers; the same jobs considered "essential" during the COVID-19 pandemic.[13]

Immigrants and residents working low-wage, temporary, or seasonal jobs struggle the most to enroll in coverage.[14] These barriers perpetuate racial and income inequities in coverage, reflecting the ongoing effects of historical racism, xenophobia, and discrimination.[15]

Racial Inequities Persist Due to Historical Racism

Because of historical racism, Black and Latinx/Hispanic residents are more likely to work in industries and jobs that do not provide coverage.[16] This worsens racial inequities in coverage.[17] The jobs most likely to lack coverage are also the jobs that Black and Latinx/Hispanic workers are disproportionately employed in due to discriminatory hiring practices and occupational segregation.

Immigrants Face the Highest Barriers to Coverage

Immigrants face the highest barriers to coverage of any group. They qualify for fewer programs than citizens, and the programs they can access offer less financial help.

New Jerseyans who are not citizens are nearly nine times more likely to be uninsured than native-born citizens and nearly five times more likely to be uninsured than naturalized citizens.[18]

Immigrants are overrepresented among the uninsured because they have so few affordable coverage options, especially those living on low incomes. Even in counties with strong outreach and low uninsured rates overall, immigrants remain ineligible for programs or face significant obstacles to purchasing affordable coverage.

Without affordable coverage options, immigrant residents who cannot pay expensive premiums on their own are left uninsured. Strong outreach efforts are critical to connecting eligible immigrants with coverage by addressing language barriers, providing information, and building trust.[19] This is especially important when federal policies threaten immigrant communities more broadly.[20]

With Federal Policy Changes, Health Coverage Options for Immigrants are Disappearing

Working-Age Adults Are Most Affected

Working-age adults face the highest barriers to coverage. Four out of every five uninsured residents across all counties are working-age adults. Seniors make up the smallest proportion of uninsured residents.[21] Medicare coverage ensures they are the least likely to struggle with access.[22]

While these coverage gaps reflect national problems, state leaders can address them by protecting residents through policy action.

The ACA Proves State Action Can Expand Coverage 

The Affordable Care Act transformed health coverage in New Jersey. Since 2014, when the law's major provisions took effect, 515,000 more residents gained insurance — coverage that protects their health and financial security.[23]

Two provisions drove this progress: the creation of GetCovered NJ, the state health insurance marketplace, and the expansion of Medicaid to cover more adults with low incomes.

Improvements in Affordable Coverage Options Have Reduced the Number of Uninsured New Jerseyans

GetCovered NJ Enrollment Has More Than Tripled

GetCovered NJ serves residents who cannot get affordable insurance through their jobs and do not qualify for Medicaid. The marketplace allows them to purchase coverage with financial help from the state and federal government.[24]

Since 2014, enrollment has more than tripled — from 161,775 in the first year to 513,217 in 2025.[25] The marketplace now provides essential coverage to more than 350,000 additional New Jerseyans.[26]

Fast Facts: New Jersey’s Uninsured Residents

3 of every 4 uninsured residents who are working-age are employed at least part-time.Residents with incomes below 100% of the federal poverty level are nearly 5 times more likely to be uninsured than those with higher incomes.

1 of every 3 uninsured residents work in industries with more low-wage and temporary jobs, such as construction or arts, entertainment, accommodation, or food services.

1 of every 9 uninsured residents work in the essential services of education, health care, and social assistance.

Hispanic/Latinx residents are 6 times more likely to be uninsured than non-Hispanic/Latinx white residents.

Black residents are over twice as likely to be uninsured as non-Hispanic/Latinx white residents.

Source: NJPP Analysis of U.S. Census Bureau, American Community Survey  - 2024 5-Year Estimates, Tables S2701 and S2702.

Medicaid Expansion Closed the Coverage Gap

Medicaid expansion brought coverage to nearly 390,000 New Jerseyans who previously fell through the cracks.[27] These residents — adults with incomes up to 138 percent of the federal poverty level ($22,025 per year for a single adult in 2026) — earn too much to qualify for traditional Medicaid but too little to afford coverage on their own, especially with limited financial help.[28]

Their jobs do not offer health insurance, and their paychecks leave little room for premiums. Medicaid expansion closed this gap, providing quality coverage to residents working hard to get by. 

Progress Is Now Threatened by Federal Cuts

Despite these improvements, residents living on low incomes and immigrants continue to face barriers to affordable health insurance. Now, federal lawmakers are withdrawing support from programs that serve families with the fewest resources, threatening to leave even more people without coverage.[29]

The ACA’s success shows that policy solutions work when properly funded and implemented. State leaders must build on this progress by countering federal cuts with state action.

State Leaders Must Counter Federal Cuts

New Jersey leaders must continue to adequately fund existing programs like Cover All Kids and take these additional actions to protect residents from federal cuts:

Expand State Subsidies on the GetCovered NJ Marketplace

The elimination of the protections provided during the COVID-19 pandemic — including enhanced premium tax credits on the health insurance marketplaces and fewer administrative barriers for continuous coverage — has set health coverage back in direct contradiction to the lessons learned during that crisis.[30]

By expanding state subsidies — the New Jersey Health Plan Savings — already provided through GetCovered NJ, the gaps created by federal cuts can be filled with a reliable funding source, ensuring that residents can continue to afford plans through the marketplace.[31] In recent years, the state spent $215 million in funds raised through a state assessment paid by health insurance companies on these subsidies to help lower the cost of plans for residents. Dedicating more state funds toward these subsidies can help to fill some of the gap left by the expected loss of $500 million in federal assistance.[32]

Improve Data Sharing and Enrollment Systems to Prevent Paperwork-Driven Coverage Loss

Beginning in 2027, adult Medicaid enrollees aged 19 to 64 will be required to complete 80 hours of “community engagement,” defined as qualifying work or community service unless enrolled in certain educational programs. If they do not meet the requirement and do not qualify for an exemption, they will lose coverage.[33] Additionally, many of those same enrollees — those adults enrolled through the ACA Medicaid expansion — will now be required to submit redetermination paperwork every 6 months, rather than once a year.[34]  Both of these requirements increase the likelihood that people will lose coverage simply due to administrative barriers.[35]

The state must take immediate action to invest in cross-departmental data sharing to reduce the paperwork required  of residents with low incomes to receive all of the support for which they are eligible. Additionally, improving the accessibility of programs dealing with enrollment and reporting in order to ensure that the paperwork is as easy to understand, fill out, and submit as possible will help to reduce the number of people who struggle to complete the requirements.[36] The recent massive coverage losses during the Medicaid unwinding — when the state had to reevaluate all Medicaid enrollees’ eligibility as pandemic protections were removed — emphasized the communication gaps and paperwork system barriers that residents face to maintain coverage.[37] Improvements to these systems are critical for protecting New Jerseyans.[38]

Establish a State Government-Backed Insurance Plan to Close Coverage Gaps

When people cannot afford health insurance, they go without coverage to pay rent, keep the lights on, and put food on the table.[39] Without immediate health concerns, these needs feel more urgent. No one should face this choice, yet it is the reality for many New Jerseyans because gaps in coverage options define the state's health care system.

Currently, every affordable coverage option in the state, except NJ FamilyCare for children, limits eligibility based on immigration status or other factors. Many people cannot even buy into Medicaid, CHIP, or marketplace coverage by paying a reasonable premium — they are simply shut out.

State leaders should establish a government-backed health insurance plan — a “public option” — open to all residents regardless of age or immigration status. This would provide affordable coverage to residents who have limited or no options in the current system. A well-designed public option can also reduce costs system-wide and improve affordability for everyone.[40]

Ensure Equal Access to Enrollment Across Counties

County social services boards help residents enroll in coverage, but their staffing and outreach vary widely.[41] In counties where leaders refuse to commit resources, fewer eligible residents get enrolled.

The state should strengthen oversight of county boards and require better pay and benefits to attract qualified staff. These steps would reduce gaps between counties and help more New Jerseyans get covered.

Adequate staffing allows county workers to conduct targeted outreach to communities that face the highest barriers to enrollment, including immigrant communities that need language assistance and trust-building efforts.[42] This is especially true when exclusionary policies threaten immigrant communities more broadly.[43] When counties lack resources, these critical outreach efforts simply do not happen.

Conclusion

New Jersey has made remarkable progress expanding health coverage over the past decade. The Affordable Care Act brought insurance to more than half a million residents who previously went without. GetCovered NJ and Medicaid expansion closed critical gaps in the system.

Federal cuts now threaten to reverse this progress. Enhanced subsidies have expired, new work requirements will create paperwork barriers, and immigrants are losing access to affordable options. Without state action, thousands more New Jerseyans will lose coverage.

State leaders have the power to protect residents and their families. By increasing state subsidies, fixing broken enrollment systems, creating a public option, and ensuring equal county access to enrollment support, New Jersey can counter federal cuts and continue expanding coverage to those who need it most.

The choice is clear: act now to protect New Jerseyans, or watch a decade of progress disappear.

The stakes are clear. Will state leaders act to protect residents, or will they allow federal cuts to strip coverage from hundreds of thousands of working families?

End Notes

[1] U.S. Census Bureau, American Community Survey -- 2024 1-Year Estimates, Table S2701, 2025. The 1-year estimate, rather than the 5-year estimate, is provided here to give the most current picture of the number of uninsured in light of the significant changes that have happened through the Medicaid unwinding and other point-in-time effects.

[2] For a full timeline of the federal cuts affecting New Jersey, see: Ambrose, A., Chen, P., Holom-Trundy, B., and Ubel, M., State Lawmakers Should Protect Residents from Federal Cuts to Vital Services, New Jersey Policy Perspective, Aug. 2025.

[3] McGough, M., State-Based Efforts Will Provide Limited Relief from Enhanced Tax Credit Expiration, KFF, Jan. 2026. New Jersey Department of Banking and Insurance, Impact of Proposed Congressional Reconciliation Bill Package on New Jersey Residents Enrolled in Health Coverage Through Get Covered New Jersey, Jun. 2025.

[4] New Jersey Department of Human Services, Statement from Human Services Commissioner Sarah Adelman, Jul. 2025.

[5] Holom-Trundy, B., Beyond the Pandemic: New Data Reveals Growing Health Insurance Coverage Gaps, New Jersey Policy Perspective, Sep. 2024. Buettgens, M., et al., 4.8 Million People Will Lose Coverage in 2026 If Enhanced Premium Tax Credits Expire, Urban Institute, Sep. 2025. Lo, J., et al., ACA Marketplace Premium Payments Would More than Double on Average Next Year if Enhanced Premium Tax Credits Expire, KFF, Sep. 2025.

[6] McGough, M., State-Based Efforts Will Provide Limited Relief from Enhanced Tax Credit Expiration, KFF, Jan. 2026.; New Jersey Department of Banking and Insurance, DOBI Response to OLS Questions on FY 2026 Budget, Jun. 2025. Biryukov, N., Rates on NJ health insurance marketplace to skyrocket, state regulator warns, New Jersey Monitor, Oct. 2025.

[7] Centers for Medicare & Medicaid Services, Bulletin on Section 71119 of the “Working Families Tax Cut” Legislation, Public Law 119-21: Requirements for States to Establish Medicaid Community Engagement Requirements for Certain Individuals, Dec. 2025.

[8] Sommers, B.D., Goldman, A.L., Blendon, R.J., Orav, J., and Epstein, A.M., Medicaid Work Requirements — Results from the First Year in Arkansas, The New England Journal of Medicine, v. 381, no. 11, Jun. 2019. Medicaid and CHIP Payment and Access Commission (MACPAC), An Updated Look at Rates of Churn and Continuous Coverage in Medicaid and CHIP, Oct. 2021.

[9] KFF, Health Provisions in the 2025 Federal Budget Reconciliation Bill, Jul. 2025.

[10] New Jersey Department of Human Services, Stay Covered NJ Renewal Data, Jun. 2024.

[11] Stainton, L., Thousands of legal immigrants in NJ could be thrown off Medicaid, NJ Spotlight News, Jul. 2025.

[12] For eligibility limitations, see the NJ FamilyCare website: New Jersey Department of Human Services, NJ FamilyCare - Who is Eligible? and NJ Familycare - Immigrant Information, 2025. For the estimate of the loss due to recent federal changes, see: New Jersey Department of Human Services, Statement from Human Services Commissioner Sarah Adelman on Impact of Medicaid and SNAP Cuts on NJ, Jul. 2025. Imperato, N. and Doobay, K., Evaluating the Policy Implications and Impact of Health Insurance Literacy Initiatives, New Jersey State Policy Lab, Rutgers University, 2025.

[13] National Conference of State Legislatures, COVID-19: Essential Workers in the States, Jan. 2021.

[14] NJPP Analysis of U.S. Census Bureau, American Community Survey – 2024 5-Year Estimates, Tables S2701 and S2702, 2025.

[15] Holom-Trundy, B., Unprecedented and Unequal: Racial Inequities in the COVID-19 Pandemic, New Jersey Policy Perspective, Oct. 2020. Ndugga, N., Pillai, D., Hill, L., & Artiga, S., Race, Inequality, and Health, In Altman, Drew (Editor), Health Policy 101, KFF, Oct. 2025. Philbin, M., et al. State-Level Immigration and Immigrant-Focused Policies as Drivers of Latino Health Disparities in the United States, Social Science & Medicine, v. 199, pp. 29-38, 2018.

[16] Yearby, R., Clark, B., and Figueroa, J.F., Structural Racism in Historical and Modern US Health Care Policy, Health Affairs, Feb. 2022.

[17] Holom-Trundy, B., Unprecedented and Unequal: Racial Inequities in the COVID-19 Pandemic, New Jersey Policy Perspective, Oct. 2020.

[18] NJPP Analysis of U.S. Census Bureau, American Community Survey -- 2024 5-Year Estimates, Table S2701, 2025.

[19] Clemente, I., and Casau, A., Covering All Kids: Strategies to Connect Children of Undocumented Status to Health Care Coverage, Center for Health Care Strategies, Feb. 2023.

[20] Novak, N.L., Kline, N., LeBrón, A.M.W., Lopez, W., Michelen, M., De Trinidad Young, M-E., Mitigating The Health Impacts Of Exclusionary Immigration Policies: An Evidence Review, Health Affairs Health Policy Brief, Nov. 2025.

[21] NJPP Analysis of U.S. Census Bureau, American Community Survey -- 2024 5-Year Estimates, Table 2701, 2025.

[22] Telesford, I., Winger, A., and Rae, M., Beyond Cost, What Barriers to Health Care do Consumers Face?, Peterson-KFF Health System Tracker, Aug. 2024.

[23] NJPP Analysis of U.S. Census Bureau, American Community Survey – 2010-2024 1-Year Estimates, Table S2701, 2025. The 1-year estimates were used for this comparison because the purpose was to compare two single points in time rather than an overall trend.

[24] New Jersey Department of Banking and Insurance, GetCovered NJ, 2025.

[25] KFF, Marketplace Enrollment, 2014-2025, 2025. Note that "marketplace" here refers to New Jersey's enrollment through the federally-run marketplace on HealthCare.Gov from 2014-2020 and then to the state-based marketplace, GetCovered NJ, from 2021 to today. New Jersey passed legislation in 2019 to create the state-based marketplace. See Office of Governor Phil Murphy, Governor Murphy Announces Launch of New State-Based Health Insurance Marketplace, Get Covered New Jersey, Oct. 2020. Holom-Trundy, B., GetCoveredNJ: How New Jersey’s State-Based Exchange Will Make Health Coverage More Affordable, New Jersey Policy Perspective, Nov. 2020.

[26] NJPP Analysis of KFF, Marketplace Enrollment, 2014-2025, 2025.The 2026 enrollment period is currently underway at the time of writing; it is on track to have enrollment numbers even higher than 2025. However, more enrollees are choosing lower level plans due to cost. See GetCovered NJ’s 2026 Open Enrollment Update, Week 9 Snapshot.

[27] NJPP Analysis of New Jersey Office of Management and Budget, Governor's FY 2026 Budget, Detailed Budget, p. D-209, Mar. 2025. Note that only the category "Expansion Childless Adults" is included here because some parents were covered through NJ FamilyCare prior to the Affordable Care Act's Medicaid expansion.

[28] N.J.A.C. 10:74-1.4, see definition of "NJ FamilyCare Alternative Benefit Plan (ABP)." U.S. Department of Health and Human Services, 2026 Poverty Guidelines: 48 Contiguous States (all states except Alaska and Hawaii), 2026.

[29] KFF, Health Provisions in the 2025 Federal Budget Reconciliation Law, Aug. 2025. Ambrose, A., Chen, P., Holom-Trundy, B., and Ubel, M., State Lawmakers Should Protect Residents from Federal Cuts to Vital Services, New Jersey Policy Perspective, Aug. 2025.

[30] Holom-Trundy, B., Beyond the Pandemic: New Data Reveals Growing Health Insurance Coverage Gaps, New Jersey Policy Perspective, Sep. 2024. Buettgens, M., et al., 4.8 Million People Will Lose Coverage in 2026 If Enhanced Premium Tax Credits Expire, Urban Institute, Sep. 2025. Lo, J., et al., ACA Marketplace Premium Payments Would More than Double on Average Next Year if Enhanced Premium Tax Credits Expire, KFF, Sep. 2025.

[31] New Jersey Department of Banking and Insurance, Lower Your Monthly Premiums with the NJ Health Plan Savings, GetCovered NJ, 2025.

[32] New Jersey Department of Banking and Insurance, DOBI Response to OLS Questions on FY 2026 Budget, Jun. 2025. Biryukov, N., Rates on NJ health insurance marketplace to skyrocket, state regulator warns, New Jersey Monitor, Oct. 2025.

[33] Centers for Medicare & Medicaid Services, Bulletin on Section 71119 of the “Working Families Tax Cut” Legislation, Public Law 119-21: Requirements for States to Establish Medicaid Community Engagement Requirements for Certain Individuals, Dec. 2025.

[34] KFF, Health Provisions in the 2025 Federal Budget Reconciliation Bill, Jul. 2025.

[35] Sommers, B.D., Goldman, A.L., Blendon, R.J., Orav, J., and Epstein, A.M., Medicaid Work Requirements — Results from the First Year in Arkansas, The New England Journal of Medicine, v. 381, no. 11, Jun. 2019. Medicaid and CHIP Payment and Access Commission (MACPAC), An Updated Look at Rates of Churn and Continuous Coverage in Medicaid and CHIP, Oct. 2021.

[36] Wagner, J., Singleton, S., and Stewart, M., A Guide to Reducing Coverage Losses Through Effective Implementation of Medicaid’s New Work Requirement, Center on Budget and Policy Priorities, Nov. 2025. Diana, A., et al., Challenges with Implementing Work Requirements: Findings from a Survey of State Medicaid Programs, KFF, Oct. 2025.

[37] New Jersey Department of Human Services, Stay Covered NJ Renewal Data, Jun. 2024.

[38] New Jersey Department of Human Services, Meeting of the Medical Assistance Advisory Council - January 2026 Presentation, Jan. 2026.

[39] While the approach to bills differ across individuals and families and their needs, people who are struggling to pay bills each month are more likely to say that they are worried about paying utilities, food, and rent than they are about paying for health coverage. As ability to pay for bills increases, the health care costs become the focus, demonstrating a shift in priorities and needs: Montero, A., Kearney, A., Valdes, I., Kirzinger, A., and Hamel, L., KFF Health Tracking Poll: Economic Views and Experiences of Adults Who Struggle Financially, KFF, Feb. 2024. Additionally, those who are uninsured are more likely to report challenges affording health care costs: Sparks, G., Lopes, L, Montero, A., Presiado, M., and Hamel, L., Americans’ Challenges with Health Care Costs, KFF, Dec. 2025. Most people who are uninsured report that they do not have coverage due to the high cost: See Figure 7 in Tolbert, J., Bell, C., Cervantes, S. and Singh, R., The Uninsured Population and Health Coverage. In Altman, D. (Editor), Health Policy 101, KFF, Oct. 2025.

[40] Monahan, C.H., Stovicek, N., and Giovannelli, J., State Public Option Plans Are Making Progress on Reducing Consumer Costs, To the Point (blog), The Commonwealth Fund, Nov. 2023. King, J. S., Gudiksen, K.L., and Brown, E.C., Are State Public Option Health Plans Worth It?, Harvard Journal on Legislation, v. 59, pp. 145-219, 2022.

[41] Holom-Trundy, B., Understaffed and Underfunded: Barriers to Effective Anti-Poverty Assistance, New Jersey Policy Perspective, Nov. 2024.

[42] Clemente, I., and Casau, A., Covering All Kids: Strategies to Connect Children of Undocumented Status to Health Care Coverage, Center for Health Care Strategies, Feb. 2023.

[43] Novak, N.L., Kline, N., LeBrón, A.M.W., Lopez, W., Michelen, M., De Trinidad Young, M-E., Mitigating The Health Impacts Of Exclusionary Immigration Policies: An Evidence Review, Health Affairs Health Policy Brief, Nov. 2025.

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