On February 25, Governor Murphy delivered his final budget address, the 2026 SFY proposed budget, “Stronger, Fairer, and More Prepared for the Future.” We have reviewed the Budget in Brief document, the first step in the budget process. The legislature’s budget committees will hold public hearings on the proposed budget and negotiations will continue until June.
The $58.1 billion budget proposal includes $1.2 billion in increases or new fees/taxes, $6.3 billion in surplus, and $2 billion in spending reductions.
Municipal Funding. The proposed budget continues flat funding for Energy Tax Receipts/CMPTRA, Open Space PILOT, and Highland Protection Fund Aid. There is no allocation for Municipal Relief Funding. The Local Recreation Improvement Grant funding is reduced from $20 million to $10 million. Transitional Aid is increased by $35 million to $161.9 million. Please note, beginning in 2026, $40 million from the Cannabis Regulatory, Enforcement Assistance, & Marketplace Modernization fund will be used for Transitional Aid.
Property Tax Relief. The proposed budget includes $28.4 billion in direct property tax relief. This includes $21.3 billion for school aid, $1.6 million in municipal aid, $123.8 million in other local aid, and $427.5 million in Direct Property Tax Relief. Please note that Direct Property Tax Relief funds ANCHOR, Stay NJ, Senior and Disabled Citizens’ Property Tax Freeze, Veterans Property Tax Deductions, and Senior and Disabled Citizens’ Property Tax Deductions. There is a slight reduction in Veterans Property Tax Deductions and Senior and Disabled Citizens’ Property Tax Deductions.
Stay NJ. The budget proposal includes $600 million, which includes $280 million appropriation plus $320 million in “lockbox” resources appropriated in prior years. The budgeted amount only supports the first 6 months of tax year 2026. It will support up to 50% of property taxes owed by eligible recipients with a maximum payment of $3,250.
Pension & Health Benefits. The budget proposal will make a full pension payment of $7.2 billion. It also includes $6.7 billion for health benefits payments for active and retired state employees, which represents an approximate 11.65% increase from SFY25.
Housing: During his budget remarks Governor Murphy noted that he looks to build upon the Affordable Housing laws with further legislation impacting zoning and permitting laws. No other details were provided. The Budget in Brief document notes that the median sales price for a single-family home in 2024 was $560,000, an 11.3% increase from 2023. In addition, between 2017 and 2023 the Consumer Price Index rose 24%, but during the same time the average property tax bill increased by 12.8%. In 2024, the average property tax increased by 3% or $313. The budget proposal includes $40 million for HMFA’s Down Payment Assistance Program and $5.5 million for Statewide Continuum of Care homelessness initiative.
Transportation & Transit. The budget proposal includes $815 million to NJ Transit. Please note that with the Corporate Transit Fees and General Fund, NJ Transit will receive a total of $902.5 million. The budget proposal also includes $1.233 billion for Transportation initiatives for state, local highway and bridge projects.
Schools. The budget proposal includes $12.1 billion for K-12 education. Governor Murphy noted that the budget would include funding to encourage implementing voting for 16 and 17 years old in local school boards elections. The Department of Education has released the district allocations of state aid on its School Finance webpage.
Public Safety. The budget proposal includes approximately $20 million for ARRIVE Together Program that partners police officers with mental health professionals when responding to a person who is experiencing a mental health crisis. It was noted in the Budget in Brief document that auto thefts in New Jersey decreased by 11% from 2023 to 2024.
Cannabis. The budget proposal includes using $200 million from the state’s cannabis revenue to support youth mental health; underage drug prevention services; programs to assist incarcerated persons as they re-enter their communities; programs that improve access to education; support for cannabis entrepreneurs; violence prevention and intervention programs; and aid to cities disproportionately affected by the War on Drugs.
Miscellaneous Budget Appropriations. The budget proposal includes $500,000 for 250th Anniversary (RevolutionNJ); $274 million for Clean Energy Program; and $52 million for family planning services and other reproductive health, including a new incentive program for OB/GYNs to move to NJ. The 7Budget in Brief also noted that in 2023 film production generated more than $700 million in economic activity.
New/Increased Revenue Sources. The budget proposal includes increasing existing fees and creating some new fees:
- Increase Assessment on Real Property
- $1 million property – from 1% to 2%
- $2 million and higher property – to 3%
- Anticipated collection of $554.2 million
- Cigarette Tax$0.30 increase per pack, increasing total tax rate from $2.70 to $3.00 per pack Anticipated collection generates an additional $41 million
- Vapor Products
- Increase Liquid Nicotine from $0.10 per mL to $0.30 per mL
- Increase Container E-Liquid from 10% to 30%
- Anticipated collection generates an additional $10 million
- Alcoholic Beverage
- Increase by 10% in Alcoholic Beverage Tax rates
- Tax imposed on quantity sold (per gallon) rather than sales price
- Varies by type of alcohol
- Anticipated to generate an additional $18.5 million
- Internet Gaming & Online Sports Wagering
- Internet gaming from 15% to 25%
- Online sports wagering from 13% to 25%
- Anticipated to generate additional $322.6 million for Casino Revenue Fund
- Truck Traffic Excise Fee
- $2 per truck
- Imposed on warehouses
- Anticipated to generate $20 million
- Unnamed Aircraft Systems (Drones)
- Social Equity Excise Fee (Cannabis)
- Class 1 license from $2.50 per ounce to $15 per ounce
- Intoxicating hemp products new $30 per ounce
- Remove sales tax exemption on boats
- Increase on firearm fees
- New excise tax on both firearms and ammunition
Potential Federal Action, NJ Response. Both the Governor’s budget address and in the Budget in Brief document outline New Jersey’s possible response to President Trump’s executive orders and policies. The budget proposal includes the elimination of the most uncompetitive direct grant programs from last year’s budget and reductions to older direct grants, formulaic and competitive grant programs due to the reduction in federal funding. The budget proposal also includes the doubling of the Office of New Americans (Department of Human Services) budget; $11.2 million for legal services in immigration related matters; and $1 million additional funding for the Attorney General’s Project for Federal Accountability. A new tax credit for manufacturing is also proposed to incentivize companies around the globe to manufacture next-generation products in New Jersey, especially companies facing the risk of new tariffs.