Gov. Mikie Sherrill is staring down a high‑stakes budget fight in her first year on the job, and the forces driving up New Jersey’s spending plan could hit residents directly in their wallets.
Rising school costs, soaring state employee health‑benefit premiums and the full launch of the Stay NJ property‑tax relief program are among the challenges the new administration is grappling with in a state budget crowded with obligations. (See how taxpayers could be affect by four of the big cost drivers below.)
The Sherrill administration has signaled that it does not plan to raise taxes in its first budget. That means proposals for spending cuts are likely.
“Spending cuts are a very important part of this,” acting State Treasurer Aaron Binder warned when pressed on the state’s budget plan during his confirmation hearing earlier this month.
Sherrill is scheduled to present her proposed budget next month. Then, lawmakers will debate the spending plan and try to get a budget approved and signed by the governor in June.
The Sherrill administration hasn’t indicated which cuts it plans to pursue. Any reductions will have to be negotiated with lawmakers who will have their own ideas. But Binder and several legislators have already pointed to the major cost drivers that could be targets for cuts.
Here’s what’s driving New Jersey’s state budget higher — and what it could mean for residents’ wallets.
Climbing school funding
The problem: School funding is the single largest line item in New Jersey’s budget, and it’s still growing. State requirements continue to push per‑pupil spending upward, meaning schools will need more aid heading into Sherrill’s first full fiscal year.
New Jersey has more than 600 school districts. Some lawmakers have said merging school districts to help save money should be a serious option this year.
A report from New Jersey Policy Perspective warned that school funding costs are part of larger “budget time bombs” left behind from earlier administrations that Sherrill will have to defuse quickly.
“Even small changes in funding per pupil can result in large cost increases for the state,” said policy analyst Peter Chen, the author of the report.
How it affects your wallet: When school spending rises, districts that don’t receive enough state aid often turn to local property taxes to make up the difference. That means any school funding cuts in the state budget will likely lead to pressure on towns to raise homeowners’ school property taxes. Renters may feel the impact too as landlords pass along increases.
Surging healthcare costs for public workers
The problem: State employee health benefit costs have ballooned. Former Gov. Phil Murphy cut the program by $75 million and warned the program could face collapse in 2026. Premiums have gone up 59% for three years in a row.
Murphy said the state needs to make structural changes to the state employee benefits program to keep it out of the red.
“Of course, achieving this goal will require hard decisions,” Murphy said in November during his last months as governor. “But that is what good government is all about: making reasonable reforms to advance the public good.”
Sherrill’s administration now inherits the challenge of overseeing any reforms.
How it affects your wallet: Rising health‑benefit costs for state workers don’t just affect Trenton — they flow outward. Municipalities and school districts tied to the insurance system may choose to raise property taxes or local fees to keep up with rising costs. That means residents may see higher bills even if state funding for the health plan doesn’t change.
Stay NJ launches — with a big price tag
The problem: Stay NJ, the new property‑tax relief program for seniors with annual incomes under $500,000, is finally up and running. Earlier state funding only covered part of the program, so Sherrill must significantly boost the program’s budget to keep it afloat.
How that affects your wallet: Seniors enrolled in Stay NJ have started getting their property relief checks. But the cost of sustaining the program long‑term falls on everyone else. Younger homeowners and non‑eligible taxpayers may eventually feel the squeeze of keeping the program going through higher taxes, reduced services or both if the state commits to funding a massive ongoing benefit.
Fluctuating federal aid
The problem: Federal pandemic aid that helped prop up programs over the last few years is expiring. Many programs funded with temporary federal dollars will either need to shut down or shift their costs onto state taxpayers.
In addition, the Trump administration has threatened New Jersey with additional funding cuts as state officials raise objections to federal immigration enforcement tactics and other issues.
During her campaign for governor, Sherrill pledged to fight Trump and sue his administration in court, if needed. New Jersey has already won a temporary stop to cuts to funding for the Gateway tunnel project and a settlement to return $1 billion in federal education funding. Sherrill has shown no intent on backing down on other issues.
“Trump seems the opposite of the Midas touch, meaning everything he touches kind of turns to crap,” Sherrill said in an interview last month on CNN.
How it affects your wallet: When federal dollars run dry, New Jersey must decide to either raise taxes, cut programs or delay projects. All of the outcomes affect residents, either through higher property tax bills, fewer services or slower infrastructure improvements.
