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.
