On Monday night, Governor Murphy signed the SFY2026 Budget into law, which passed the Senate with a 26-13 vote and Assembly with a 52-27-1 vote. The $58.78 billion budget includes a full $7.2 billion pension payment, $12 billion in funding for public schools, and a $6.7 billion surplus.  

In his budget signing message on Friday the Governor noted that “the $58.78 billion Fiscal Year 2026 (FY2026) budget, which was passed by the Legislature earlier today, redirects over 75 percent of the total budget back into our communities in the form of grants-in-aid for property tax relief, social services, higher education, as well as State aid to schools, municipalities, and counties. The budget includes an all-time high level of direct property tax relief for homeowners and renters, yields the highest level of school funding in history, and delivers a fifth consecutive full pension payment. It also prioritizes quality health services for women and families, and it invests in beginning to fully modernize NJ TRANSIT’s fleet.” 

Governor Murphy originally proposed levying sales tax on “fun” categories. However, the proposed taxes on cigarettes, e-cigarettes, sports betting, and realty transfer fees will increase. Effective August 1, 205, P.L. 2025, c. 68 increases the taxes on cigarettes from $2.70 per 20 pack to $3.00 per 20 pack, liquid nicotine taxes will increase from $0.10 to $0.30 per fluid milliliter, and container e-liquid rate would increase from 10% to 30% of the retail list price.  Effective July 1, 2025, P.L. 2025, c. 66 increases the internet casino gaming tax from 15% to 19.75%, the internet sports wagering tax from 13% to 19.75%, and the daily fantasy operating fee from 10.5% to 19.75%. Effective, July 10, 2025, P.L. 2025, c.69 increases additional taxes and fees imposed on certain real property transfers over $2 million, provides that the seller rather than the buyer is responsible for the payment of both the additional fee and the controlling interest transfer tax imposed on certain transfers of real property valued at over $1 million. 

Of municipal interest, Energy Tax Receipts and Consolidated Municipal Property Tax Relief Aid (CMPTRA) will remain flat. The FY2026 budget allocates an appropriation of $649.3 million for CMPTRA and $805.6 million ETR. As in past years, the proposed CMPTRA appropriation remains flat and is transferred to ETR to avoid the “poison pill” provision of ETR. As a result, no municipalities will receive CMPTRA and there is no increase in ETR from the FY2025 budget. 

The budget bill also added language to: 

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  Allow the Local Efficiency Achievement Program to use grant funding for contracting with an individual or firm that has demonstrated track record of successfully completed operational reviews and assessments to conduct local government efficiency reviews.  
• Achieve $100 million in State funds in health benefits savings during the first six months of the 2026 plan year. 
  • By July 31 the State and public employees’ representatives on the State Health Benefits Plan Design Committee (SHBPDC) must separately submit cost savings proposals to the plan actuary. 
  • The plan actuary must review the proposals to determine whether the plan design proposals will result in recurring and actuarially verifiable cost savings, noting whether they will be achieved in the first six months of PY 2026 in the amount of $100 million.  
  • Any proposal that the plan actuary determines will not result in recurring and actuarially verifiable cost savings, or less cost savings than proposed, in the first six months of PY 2026 must be adjusted to reflect actuarially verified cost savings or eliminated from further consideration if no savings are actuarially verified. 
  • Before September 30, the SHBPDC must meet and vote on each of the verified proposals.  
  • If the plan actuary determines that the cost savings proposals submitted by the labor and administration representatives will not result in recurring and verifiable total savings of at least $100 million during the first six months of PY 2026, the SHBPDC labor and administration representatives must submit additional proposals to the plan actuary in an effort to achieve the $100 million savings targets before September 30, 2025. 
  • If the SHBPDC is unable to reach agreement on the actuarially verified proposals totaling $100 million in cost savings before September 30, 2025, the SHBPDC shall immediately commence the existing prescribed mediation and conciliation procedure set forth in P.L.2011, c.78, and that process must be concluded by October 31, 2025.  
  • If the SHBPDC is unable to reach agreement on cost savings proposals totaling $100 million in actuarially verified savings following the existing statutorily prescribed mediation and conciliation procedure set forth in P.L.2011, c.78, the Legislature must revise the statutory framework set forth in P.L.2011, c.78 to determine a process by which $100 million in actuarially verifiable cost savings shall be achieved for PY 2026 before December 1, 2025.  
  • If the Legislature does not pass a bill revising the statutory framework before December 1, 2025, then a representative of the State selected by the Governor and a public employees’ representative selected by the State employees’ and local employees’ representatives on the SHBPDC must jointly select cost-saving changes to achieve $100 million in actuarially verifiable cost savings.  
  • In the event that the State representative and the public employees’ representatives are unable to reach agreement, then the Executive Director of the Office of Legislative Services shall designate an additional representative and the three representatives must meet and vote to select cost-saving changes to achieve the $100 million in actuarially verifiable cost savings for the first six months of PY 2026 by December 15, 2025.  
• Allocates Opioid Recovery and Remediation Fund balances received by the State for distribution as follows for the purpose of providing necessary care and treatment for victims of opioid-related health issues:
  • $10 million to Hackensack Meridian Health  
  • $15 million to RWJ Barnabas Health  
  • $15 million to Cooper University Health Care 
  • $5 million to Atlantic Health 
• Modifies appropriation of the Cannabis Social Equity Excise Fee to include $8 million to Department of Community Affairs to support anti-violence Out-of-School Youth Summer Programs, which shall provide grants to Newark, Trenton, Paterson, and Atlantic City, and $35 million to support Transitional Aid Localities.  
• Removed language specifying use of Youth Vote Expansion Grants appropriations.  
• Adds language to allow amounts appropriated for New Jersey Health Homes to be transferred to the New Jersey Affordable Housing Trust Fund to support housing related operating costs pertaining to the New Jersey Healthy Homes programs. 

We are continuing to review the budget documents and will provide additional updates.  

Contact: Erin Knoedler, Legislative Analyst, eknoedler@njlm.org, x116.