New Jersey Passes $56.6 Billion Budget, Raises Corporate Taxes to Fund Transit and Education

New Jersey's Democrat-controlled Legislature has approved a $56.6 billion budget for the upcoming fiscal year, marking a significant shift in the state's financial priorities. The budget, which now awaits Governor Phil Murphy's signature, includes substantial increases in funding for education and property tax relief, while also introducing a controversial tax hike on high-earning corporations.

The budget passed two days ahead of the constitutional deadline, averting the possibility of a government shutdown. It represents a modest 4% increase from the previous year's spending plan, reflecting a cautious approach to fiscal management in uncertain economic times.

A key feature of the new budget is the increase in the top corporate tax rate from 9% to 11.5% for businesses earning over $10 million annually. This measure, dubbed the "corporate transit fee" by Governor Murphy, is intended to provide dedicated funding for New Jersey Transit, the state's beleaguered public transportation system. For years, the agency has been forced to divert capital funds to cover operational costs, a practice that has raised concerns about its long-term sustainability.

The budget allocates significant resources to education, with K-12 funding set to increase by nearly $1 billion, bringing the total to over $11 billion. This boost aims to fully implement an aid formula ratified by the state Supreme Court, addressing long-standing disparities in school funding across the state.

Property tax relief is another major focus of the budget, with $2.5 billion earmarked for direct relief programs. These initiatives, which began in 2022, are designed to ease the burden on homeowners, renters, and senior citizens in a state where the average property tax bill in 2022 was approximately $9,500.

The budget also includes funding for a wide range of social programs, including initiatives to combat homelessness, support prisoner reentry, and bolster fire departments and arts programs. These allocations, sometimes referred to as "Christmas tree line items," reflect the diverse priorities of state lawmakers.

While Democrats have hailed the budget as a responsible and forward-thinking plan, Republicans and business groups have criticized the corporate tax increase. They argue that it could stifle economic growth and penalize successful companies that contribute significantly to the state's economy.

This budget represents the penultimate financial plan of Governor Murphy's tenure, as term limits will prevent him from seeking re-election in 2026. Since taking office in 2018, Murphy and the Democratic legislature have overseen significant changes in New Jersey's fiscal landscape, including increased investments in education, public pensions, and the state's rainy day fund.

As the budget now moves to Governor Murphy's desk for final approval, New Jersey residents and businesses alike are bracing for the impact of these new financial measures on the state's economic future.

Why This Matters: This budget decision will have far-reaching implications for New Jersey's residents, businesses, and public services. The increased funding for education and property tax relief could provide significant benefits to many households, while the corporate tax hike may influence business decisions and economic development in the state. The dedicated funding for New Jersey Transit could lead to improvements in public transportation, affecting daily commutes and urban development.

Key Takeaways:

• New Jersey's $56.6 billion budget increases corporate taxes for high-earning companies.
• K-12 education funding sees a nearly $1 billion boost to over $11 billion.
• $2.5 billion is allocated for property tax relief programs.
• The budget aims to provide dedicated funding for New Jersey Transit.
• The corporate tax increase has drawn criticism from Republicans and business groups.