New Jersey

State Fiscal Briefs

October 2020

New Jersey’s budget basics

According to the National Association of State Budget Officers (NASBO), New Jersey’s total expenditures in fiscal year (FY) 2019 were $64.8 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2019 were $2.1 trillion, ranging from $4.5 billion in South Dakota to $311.3 billion in California.

Each state allocates spending and taxes differently among different levels of governments, and local governments often administer programs with state funds, so combined state and local government data show a more complete picture of individual benefits and contributions when comparing states.

Per the US Census Bureau, New Jersey’s combined state and local direct general expenditures were $93.2 billion in FY 2017 (the most recent year census data were available), or $10,482 per capita. (Census data exclude “business-like” activities such as utilities and transfers between state and local governments.) National per capita direct general expenditures were $9,446.

New Jersey’s largest spending areas per capita were elementary and secondary education ($3,068) and public welfare ($1,991). The Census Bureau includes most Medicaid spending in public welfare but also allocates some of it to public hospitals. Per capita spending is useful for state comparisons but is an incomplete metric because it doesn’t provide any information about a state’s demographics, policy decisions, administrative procedures, or residents’ choices.

New Jersey’s combined state and local general revenues were $100.0 billion in FY 2017, or $11,255 per capita. National per capita general revenues were $9,592. New Jersey uses all major state and local taxes. New Jersey’s largest sources of per capita revenue were property taxes ($3,276) and federal transfers ($2,043). Property tax revenue accounted for 29 percent of New Jersey’s combined state and local general revenue in 2017. New Jersey was the second-most reliant state on property taxes. Despite perpetual debates, the state has not been able to agree on property tax reform.

New Jersey’s politics

Governor Phil Murphy, a Democrat, was elected in 2017 with 56 percent of the vote. The next gubernatorial election is in 2021.

Democrats control both the State House (52 Democrats to 27 Republicans) and Senate (25 Democrats to 15 Republicans). Control of the governor’s mansion and each house of the legislature gives Democrats a trifecta in New Jersey. All New Jersey State House seats are on the ballot in 2021 because members serve two-year terms. Senators serve a combination of two- and four-year terms during each decade’s legislative district apportionment cycle. This 2-4-4 term system ensures all Senate seats are up for election after new legislative district boundaries are drawn. All senators are therefore up for election in 2021.

New Jersey’s budget institutions, rules, and constraints

New Jersey uses an annual budget. The legislature must pass a balanced budget, but it can carry a deficit over into the following year. New Jersey further limits spending growth with a budget rule based on personal income growth. The rule is binding and requires a legislative supermajority or vote of the people to override. New Jersey limits total authorized debt incurred by the state, but not debt service.

(Note: Some states have informal budget institutions that constrain overall spending growth or a specific expenditure’s growth.)

New Jersey’s recent fiscal debates

  • Since taking office in 2018, Governor Murphy has pushed two tax proposals with mixed success: increasing income taxes on high earners and legalizing and taxing marijuana. In 2018, the governor and legislature agreed to create a new top tax bracket, on taxable income greater than $5 million, and raise the rate for this new bracket from 8.97 percent to 10.75 percent. That budget agreement also included a new corporate income tax surcharge on companies earning more than $1 million a year. The state estimated the two new taxes would raise $705 million in revenue over the fiscal year. In 2019, the governor tried unsuccessfully to lower the taxable income threshold for the top bracket to $1 million. Bills legalizing marijuana were introduced in both 2018 and 2019, but none garnered enough support to pass in the Senate. Instead, in November 2019, the legislature approved a 2020 ballot initiative that will let voters decide the issue. But the ballot initiative does not include a marijuana excise tax; it would only levy the state’s general sales tax on legal marijuana purchases.
  • In February 2019, Governor Murphy signed legislation that gradually raises the state’s minimum wage from $8.85 an hour in 2019 to $15 an hour in 2024. Seasonal workers, small business employees, and farm workers will see their minimum wage increase on a slower schedule but it will also eventually reach $15 an hour (e.g., agricultural employees will reach $15 an hour in 2027).
  • The Supreme Court lifted the national restriction on legal sports gambling because of a lawsuit brought by New Jersey. As such, the state was one of the first to offer legal and taxable sports betting and was the first state outside of Nevada to fully embrace online sports wagers. Although most states with newly legal sports betting collected only a few million dollars from sports betting taxes, New Jersey collected nearly $30 million in its first year. Roughly 80 to 90 percent of the state’s sports betting tax revenue comes from online sports wagers.

New Jersey’s current budget

Governor Phil Murphy released his proposed FY 2020 budget in March 2019. Governor Murphy’s plan increased public pension funding (New Jersey’s public pension system is one of the lowest funded in the nation), property tax relief, and higher spending on prekindergarten, public transportation, and opioid treatment programs. Much of the governor’s new initiatives were paid for with his proposal to start New Jersey’s top individual income tax rate (10.75 percent) on taxable income over $1 million instead of the current $5 million. The governor also focused much of his 2019 state of the state address on reforming New Jersey’s use of business tax incentives. A recent audit from the state reported the state awarded over $11 billion in tax incentives over the past 13 years.

The legislature passed its budget in June 2019. Although the enacted budget included spending increase for education, transportation, and other programs highlighted in the governor’s budget, it did not include the governor’s proposed income tax increase. Without the revenue from the individual income tax increase, the final budget did not spend as much as those the governor proposed, and his property tax relief was not enacted. The budget allocated $3.8 billion for the state’s public pension system and the first deposit in the state’s rainy-day fund in over a decade. The governor also issued an executive order that established a task force to examine New Jersey’s business tax incentives.

Governor Murphy gave his 2020 state of the state address in January 2020 and released his proposed FY 2021 budget in February 2020.

For more on New Jersey’s budget, see