It was a common refrain among some reactionaries after Gov. Mikie Sherrill unveiled her FY27 budget proposal last month:
How can the first-year governor claim she’s holding the line on spending when her proposal is a record-high $60.7 billion?
From NJBIA’s point of view, however, Sherrill’s inaugural budget is a move in that right direction.
“We understand the want of people tired of the rampant overspending over the previous eight years to drastically scale it back in one fell swoop,” NJBIA President and CEO Michele Siekerka said. “But in actuality, it doesn’t work like that.
“The governor has to be given some room in her first year to bring her own attention to New Jersey’s fiscal situation, to work toward fiscal responsibility methodically, while allowing herself to get a full picture of where the greatest needs are and where the greatest returns on investments are. And she’s doing that now while making some early and necessary cuts.”
“If you look at the budget proposal, much of the additional spending is the result of accounting for inflation,” added NJBIA Chief Government Affairs Officer and resident budget guru Christopher Emigholz.
“Yes, there are business tax increases we don’t like as part of the budget, and we are engaging with both the Governor’s office and the Legislature on them. But on the other side of the coin, you can see that Governor Sherrill is attempting to hold the line on spending for the things that she can control.
“It’s also increasingly apparent that she’s going to keep a sharp eye on last-minute budget items that have really added billions of dollars to overall spending over the past eight years. That would be a very welcome and necessary approach that brings greater responsibility, transparency and accountability to the state budget,” Emigholz added.
Sherrill’s budget reflects a 3.2% spending increase from Gov. Phil Murphy’s last spending plan of $58.8 billion.
Murphy’s average annual rise was nearly 9% throughout the course of his eight budgets.
Sherrill’s proposal includes roughly $2.4 billion in cuts, including the removal of about $700 million in "one-shot" items from the previous budget.
It also aims to reduce New Jersey’s structural deficit from $3 billion to $1.5 billion.
The governor’s FY27 proposal also reduces the Stay NJ property tax relief program by roughly $500 million.
NJBIA has been a long-standing advocate for true property tax reform versus rebate checks.
Additionally, many – including NJBIA – questioned how Stay NJ would ever be fully funded when it was first introduced in July 2023. Sherrill is now being prudent with the program’s belt-tightening. Her plan calls for the reduction of the maximum benefit from $6,500 to $4,000 and the cutting of the income eligibility cap from $500,000 to $250,000 annually.
“It’s a tricky balance,” Emigholz said. “You want to be able to help seniors afford to live in New Jersey, but New Jersey as a state also has to be able to afford the program. We are in an affordability crisis and we can’t raise taxes any higher. The answer remains that we need to get to a reform agenda.”
Siekerka said one of the more encouraging aspects of Sherrill’s budget is the avoidance of one-time fixes, which was an annual hallmark of Murphy’s spending plans.
She said if the governor can set a new budget base for herself, particularly with an even more challenging budget looming next year, it would put the state in a better position for a comprehensive reform agenda.
“We have structural challenges that have stood in the way of making New Jersey affordable and regionally competitive,” Siekerka said. “We can no longer remedy budget imbalances with more taxes on business and on residents.
“Governor Sherrill has shown to be pragmatic through her first 100-plus days. She wants to govern, and she is prioritizing affordability. Because this budget starts to hold the line on spending, it has the potential to give us that much-needed level set so we can better address things like underfunded pensions, health benefit costs and education costs.
“You can’t do it all in one step, but it is important to take that first step. And I think that’s what she’s doing.”
