Governor Murphy Signs Historic $56.6 Billion FY2025 Budget

Last week, Democratic leaders in the New Jersey State Legislature introduced the FY2025 budget and efficiently moved it through committees. On Friday, the State Senate and General Assembly approved a historic $56.6 billion spending bill for FY2025, which Governor Murphy promptly signed into law later that day.

This year's budget represents a 4% increase, about $2 billion, compared to last year’s $54.3 billion plan. 

Property Tax Relief Programs Funded

New Jersey homeowners face the highest property tax rates in the nation. The FY2025 budget includes several programs designed to alleviate this burden for eligible homeowners. Notably, it allocates over $2 billion for the third year of the ANCHOR tax relief program, providing up to $1,750 for 1.3 million homeowners and up to $700 for over 700,000 renters.

Additionally, new funding in the budget is expected to make another 58,000 seniors eligible for the Senior Freeze program. There is also an additional $220 million for the Stay NJ property tax program for New Jersey seniors, which will take effect in two years.

Corporate Transit Fee

The FY2025 budget introduces a new Corporate Transit Fee expected to generate $1 billion in revenue dedicated to funding NJ Transit. This fee imposes a 2.5% tax on approximately 600 New Jersey companies with annual profits of at least $10 million, retroactive to January 1, 2024.

Business advocacy groups in New Jersey argue that the Corporate Transit Fee could harm the economy, drive companies out of the state, and make New Jersey less attractive for business relocations. However, advocates highlight the necessity of these funds to offset a projected $750 million deficit for NJ Transit, despite a 15% fare increase for commuters starting July 1.

Public Education Funded

The budget allocates $12 billion for public schools, marking the first time the state has made a full payment under the current funding formula. However, not all districts will see increased aid, as the formula considers factors like enrollment, poverty levels, and tax base strength, which can vary yearly.

Public Workers Pension Fully Funded

The FY2025 budget includes a full $7 billion payment to the public worker pension fund, supporting the retirement of approximately 800,000 active and retired state and local government workers. This marks the fourth consecutive year of full payments.

Tax Breaks Ended

The FY2025 budget discontinued a back-to-school sales-tax holiday that had been in place for the past two years. Additionally, a sales-tax break to encourage the purchase of electric vehicles will begin to be phased out under separate legislation approved by budget committees earlier this week.

Additional Budget Allocations

The FY2025 budget includes several other key allocations:

• About $700 million in new spending added by lawmakers for dedicated projects and programs.
• Continuation of the Earned Income Tax Credit, Child and Dependent Care Tax Credit, and Child Tax Credit, providing up to $1,000 per child.
• $120 million to complete the State Police Training Center.
• $91.8 million for food assistance programs.
• $57 million to increase affordable housing, including a pilot program for single-family homes and smaller houses in backyards.
• $30 million for a two-year initiative to end homelessness among military veterans.
• $21 million to convert double rooms to single rooms in state-run veterans’ nursing homes, plus $2 million to replace equipment and mattresses.

Proposed Taxes and Fees Not Included

Several proposed taxes and fees by Governor Murphy were not included in the final budget. These included a 7% sales tax, a $1 tax on every truck delivery to New Jersey warehouses, and increased fees on individual gun permits and gun seller licenses.

Future Budget Concerns

Leaders from both parties have cautioned about potential budget deficits in future years. Despite a nearly $6.2 billion surplus in this year’s budget, a structural deficit of over $2 billion remains. A budget expert from the nonpartisan Office of Legislative Services warned earlier this year that continued spending of the surplus at this rate could threaten the sustainability of the state’s fiscal path.