New Jersey

State Fiscal Briefs

September 2021

Looking for New Jersey data related to the pandemic? We have health, economic, and fiscal data on our new tool, How the COVID-19 Pandemic is Transforming State Budgets.

New Jersey’s budget basics

According to the National Association of State Budget Officers (NASBO), New Jersey’s total expenditures in fiscal year (FY) 2020 were $67.8 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2020 were $2.3 trillion, ranging from $4.7 billion in Wyoming to $337.7 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 $93.4 billion in FY 2018 (the most recent year census data were available), or $10,513 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 $9,801.

New Jersey’s largest spending areas per capita were elementary and secondary education ($3,114) and public welfare ($2,040). 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 $103.3 billion in FY 2018, or $11,628 per capita. National per capita general revenues were $10,071. New Jersey uses all major state and local taxes. New Jersey’s largest sources of per capita revenue were property taxes ($3,378) and federal transfers ($2,023). Property tax revenue accounted for 29 percent of New Jersey’s combined state and local general revenue in 2018. 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 28 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 Murphy released his FY 2021 budget proposal in February 2020. The proposed budget included $40.9 billion in total spending, a 2 percent increase from FY 2020. The proposal included raising the income tax rate on taxable income above $1 million.

The state responded to the pandemic by extending its fiscal year past its usual June 30 end date to September 30, 2020. In coordination with this move, the state passed a three-month, $7.6 billion spending plan (which included funding cuts and spending deferrals) to close out FY 2020. In August, Governor Murphy released a revised FY 2021 budget proposal, that included $40.1 in total spending, a $500 million decrease from his original proposal. The FY 2021 budget was enacted in September 2020. To balance the budget, the state approved over $4 billion in borrowing and passed the income tax rate hike on taxable income above $1 million.

Governor Murphy released his FY 2022 budget proposal in February 2021 and gave his State of the State address in January 2021. The governor proposes $44.8 billion in total spending, an increase from both enacted FY 2021 spending and what the governor proposed for that fiscal year before the COVID-19 pandemic. Governor Murphy is not proposing any tax increases, but the state’s revenue was boosted by the individual income tax increase passed in calendar year 2020 plus the $4 billion in borrowing. The governor also plans to send $500 tax rebates over the summer to families with at least one child and less than $75,000 in income if single and $150,000 if married, which was part of the income tax hike agreement struck last year.

For more on New Jersey’s budget, see