By Justus Wilhoit and Cora LeCates, NJ State House News Service with additional reporting by Seth Siditsky
Governor Phil Murphy signed a record-setting $58.8 billion state budget on Monday, July 1, with expanded school funding, property-tax relief for seniors, and a full pension payment for public workers. But the spending plan comes as New Jersey and other states brace for the impact of new federal legislation signed by President Donald Trump on July 4, which includes sweeping tax cuts and deep reductions to safety-net programs.
The New Jersey budget includes $600 million for the newly created StayNJ initiative, which will freeze property taxes for most senior homeowners beginning in January 2026. The plan also allocates $12 billion in school aid—an all-time high—and makes a full $7.2 billion pension payment, marking the fifth consecutive year the state has met that obligation in full.
To help balance the budget, lawmakers raised taxes on cigarettes and vaping products, online gambling, and real-estate transactions over $2 million. They also approved a $50 million reduction in state employee health benefit funding, less than the $100 million cut Murphy had originally proposed.
The $6.7 billion surplus was a central part of the debate, with some Democrats calling it a safeguard against national uncertainty, while Republicans criticized the size and structure of the budget.
Trump Signs Federal Package
Just days after New Jersey adopted its budget, President Trump signed a sweeping federal tax-and-spending package—widely referred to as the “One Big, Beautiful Bill.” The legislation extends tax breaks, increases defense and immigration enforcement funding, and includes significant cuts to federal spending on Medicaid, the Supplemental Nutrition Assistance Program (SNAP), and other domestic programs.
According to the Congressional Budget Office, the federal bill is projected to increase the national debt by more than $3 trillion by 2034. In New Jersey, the effects could be substantial. The state has about 1.7 million residents enrolled in Medicaid and more than 825,000 relying on SNAP benefits—programs now at risk of reduced funding.
Murphy, a Democrat in the final year of his second term, did not comment directly on the federal legislation during his budget signing but framed the state’s budget as a safeguard for residents.
“This budget exemplifies our dedication to fiscal responsibility, affordability and opportunity for all New Jerseyans,” Murphy said in a statement. “Over nearly eight years in office, we have maintained a steadfast commitment to building a stronger and fairer New Jersey and righting our fiscal ship.”
Party-Line Vote and Floor Debate
The budget passed along party lines, with Democrats in favor and Republicans opposed. Democrats defended the budget as both progressive and prudent.
“This budget is a fiscally responsible plan that upholds the core priorities of New Jersey’s working families as we confront challenging economic and fiscal conditions,” read a joint statement from Senate President Nick Scutari, Senate Majority Leader Teresa Ruiz, and Senate Budget Committee Chair Paul Sarlo.
On the Senate floor, Sen. Andrew Zwicker, a Democrat from South Brunswick, unsuccessfully proposed reallocating money from the state’s Clean Energy Fund to direct environmental investments, citing the concurrent vote in Washington.
“At this very moment, the United States Senate is debating a bill of enormous consequences for the country,” Zwicker said. He warned that New Jersey could be disproportionately affected by federal cuts to healthcare and clean energy.
Assembly Budget Chair Eliana Pintor Marin, a Democrat from Newark, echoed concerns about national instability.
“We are in a period of economic uncertainty, and a time when we need to be cautious,” Pintor Marin said. The surplus, she added, “allows us to safeguard critical shortages.”
Republicans criticized the budget’s size and structure throughout the process. Sen. Michael Testa, from Vineland, likened the 373-page bill to the horror film The Blob for its perceived sprawl and waste. Sen. Declan O’Scanlon, of Little Silver, called it a blow to affordability and job growth.
What Comes Next
With the federal bill now law and fiscal uncertainty looming, the Murphy administration may soon face pressure to revisit spending decisions, particularly if anticipated federal support for Medicaid or SNAP is reduced.
For now, state officials are signaling that the surplus and targeted investments will allow New Jersey to buffer against some of the national headwinds. But as both Washington and Trenton brace for the long-term impacts, the next fiscal test may come sooner than expected.
