(Bloomberg) -- New Jersey Governor Phil Murphy is looking to rein in spending as his administration sees “more risk” to its relationship with Washington.
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On Tuesday, he unveiled a $58.1 billion blueprint for the fiscal year that begins July 1 that caps new discretionary spending. Murphy’s budget proposal for his final term also increases funding for the state’s public transit system and contributes $7.2 billion to its underfunded pensions.
His budget relies on $27.9 billion of federal funds. The Trump administration’s move in January to pause federal loans and grants caused panic, though a judge issued a long-term block on the plan on Tuesday. A potential government shutdown in March could also create a funding burden for New Jersey, the budget proposal says.
“While I sincerely hope that the situation in Washington settles down, and that we — in turn — have a normal, healthy budget season over the next few months, that is by no means a guarantee,” Murphy said in his address that was delivered at the state capitol in Trenton. “There is a distinct possibility that we will, instead, need to pursue a ‘break the glass’ strategy.”
He had to reduce expenses by $2 billion to keep the spending plan about $70 million less than the state’s adjusted budget for the current fiscal year. That means next year’s total spending remains relatively flat.
Some of the cuts include a $303 million reduction to the state’s agriculture department, a $305 million decline in funding for the environmental protection department, and a $267 million cut for the community affairs department, according to budget documents. The proposal also includes a $64 million reduction for colleges and universities as part of a broader $184 million decline in higher-education funding.
Murphy is a Democrat serving his second and final term, which ends in January 2026. Candidates to replace him include former Republican Assemblyman Jack Ciattarelli as well as Democrat US Representative Mikie Sherrill and Newark Mayor Ras Baraka.
But budgeted expenditures are about $1.2 billion more than anticipated revenues, a structural gap. Murphy said he is committed to shrinking that deficit.
“Unlike Washington, which hasn’t had a balanced budget since the 1990s, we cannot spend beyond our state’s means indefinitely,” he said. “We are getting New Jersey’s budget back on the road toward balance, so we can uphold our obligation to keep our fiscal house in the best shape possible.”