Governor Murphy Proposes FY 2026 Budget Focused on Fiscal Responsibility and Planning for New Jersey’s Future
Governor Phil Murphy presented his State FY 2026 Budget to a joint session of the Legislature on Tuesday, February 25. This year’s address marks the final budget of Murphy’s eight years in office. The proposed budget totals $58.05 billion, which is $70 million less than the FY 2025 adjusted budget appropriation. The FY 2026 budget includes a $6.3 billion surplus and a structural deficit of $1.2 billion.
The Governor’s budget address was centered around themes of fiscal responsibility and planning for future economic security and opportunities for all New Jerseyans. Governor Murphy reaffirmed his administration’s intentions to work in concert with the Trump administration. He noted, however, that there is a distinct possibility that New Jersey may need to adopt a “break the glass” strategy if New Jersey faces the harsh reality of losing billions of federal dollars for state programs.
Affordability and Property Tax Relief
Governor Murphy addressed rising costs and inflation in his address. The proposed budget aims to improve affordability by addressing property taxes and increasing access to housing. The budget includes $28.5 billion in direct and indirect property tax relief, including nearly $4.3 billion in direct property tax relief through programs such as the Affordable New Jersey Communities for Homeowners and Renters (ANCHOR) Property Tax Relief Program and the Senior Freeze Program. Governor Murphy noted that the average tax relief payment will be over $1,500 to eligible New Jersey homeowners in FY 2026. The proposed budget also includes a new sales tax exemption for cribs and other critical baby supplies, geared at providing relief to New Jersey families.
The Governor called on the Legislature during his address to reform New Jersey’s zoning and permitting laws to ease the process of building new, affordable housing and stabilize the cost of housing. The budget proposal also includes $40 million for down payment assistance for first-generation homebuyers through the Affordable Housing Trust Fund.
New Jersey Transit
In 2024, corporations with more than $10 million in taxable net income became subject to a 2.5 percent Corporate Transit Fee, effective from January 1, 2024, through December 31, 2028. This fee provides a dedicated funding stream for New Jersey Transit. In FY 2026, New Jersey Transit will receive $815 million from the Corporate Transit Fee to address service cuts and operational issues.
Pension Payment and State Operations
Governor Murphy’s proposed budget includes a full payment of $7 billion toward the State’s public-employee pension obligation (the fifth consecutive full payment). The budget proposal also includes using over $220 million from the Debt Defeasance and Prevention Fund to ensure the construction of a new female correctional facility, fulfilling a promise from 2021 after the Governor began the process of relocating the Edna Mahan Correctional Facility for Women.
The Governor also proposes doubling the budget for the Office of New Americans (ONA) in the State’s Department of Human Services. The ONA supports new Americans through outreach and education and works on priorities to build trust, improve access to social services, workforce development, and employment services. The budget proposal includes $11.2 million to provide legal services in immigration-related matters.
Education and Planning for New Jersey’s Next Generation
Governor Murphy’s proposal includes a record-breaking $12.1 billion for K-12 schools in FY 2026 to fully fund New Jersey’s public education system. As part of the Governor’s commitment to improving learning outcomes, the budget proposal includes $10.5 million to support high-impact tutoring and accelerate the transition to phone-free schools.
The FY 2026 budget also includes $1.3 billion for the Preschool Education Aid. During the address, the Governor noted that since 2018, his administration expanded pre-K to 229 school districts and created nearly 20,000 new seats. The Governor further noted that he plans to work with the Legislature to codify pre-K aid and require access to full-day kindergarten.
Fundamental Rights
The proposed budget includes $52 million for family planning services and other reproductive health programs, and launches a new incentive program for OB/GYNs who want to move to New Jersey so they can provide healthcare without burdensome government restrictions.
The Governor also reaffirmed his commitment to changing voting laws to allow 16- and 17-year-old residents to vote in local school board elections.
Economic Development and Innovation
Governor Murphy called for a bipartisan legislative effort to enact a new tax credit that will incentivize international companies, especially those facing the risk of new tariffs, to manufacture next-generation products such as cutting-edge pharmaceuticals or renewable energy components in New Jersey.
The proposed budget includes $20 million for Strategic Innovation Centers, with the goal of accelerating economic recovery and driving the long-term growth of the State’s innovation economy. Additionally, the proposed budget would direct resources toward emerging innovation fields such as: fintech, clean energy, filmmaking, advanced manufacturing, and Artificial Intelligence (AI).
The Governor’s address also highlighted job-creation initiatives. By the end of 2025, the Murphy administration will have invested nearly $200 million into expanding apprenticeship, pre-apprenticeship, and other vocational programs all across New Jersey.
The text of the Governor’s budget address may be found here, and the Budget in Brief may be found here. As the budget process continues, the Legislature will hold public hearings, and each of the Executive Departments will make presentations to the Senate and General Assembly Budget Committees. New Jersey’s current fiscal year ends on June 30, 2025. The Legislature must enact a budget by that date.