Sweeney Center Projects a Grim Outlook for NJ’s Fiscal Condition: Gov. Murphy Leaves a Mess for the Next Governor

Thank goodness for the Sweeney Center for Public Policy at Rowan University.  At least there’s one group out there documenting the real world that will confront New Jersey after eight years of Gov. Murphy’s spendthrift governance.  The Sweeney Center’s Multi-Year Budget Work Group has published its 5th report with sobering projections for New Jersey’s future fiscal condition. The bottom line is that due to large revenue windfalls Murphy had the opportunity to address some of New Jersey’s long-term problems, but he chose not to.  Instead, he ramped up spending and took care of his public union supporters, leaving a mess for the next governor to clean up.  

Here are some key points:

• For the past three fiscal years, Murphy’s budgets have run “significant structural deficits” of $1.8 billion, $3.2 billion, and $2.1 billion.  We would add that Murphy’s proposed FY2026 budget has another $1.2 billion structural deficit.
• These deficits were covered by drawing down on the $10.7 billion surplus built up by “the infusion of billions of dollars of federal aid” and the state’s debt defeasance fund. We would add that accumulated surpluses should be “rainy day” funds available for fiscal emergencies, not an all-purpose slush fund for Murphy and the legislature’s current spending priorities. And debt defeasance funds are supposed to pay down debt not cover deficits.
• As of FY2025, the accumulated surplus stood at $6.2 billion, a 10.9% surplus, which is substantially lower than the 24% national average and 8th lowest among the states.  And it looks like it will be going lower in the FY2026 budget.
• New Jersey will continue to face structural budget deficits over the next four years, with baseline projections for average deficits of $3.7 – $6.7 billion. This would result in a cumulative $15 billion deficit.  That’s the reality confronting New Jersey’s next governor.
• The report concludes: “the magnitude of the projected shortfalls is daunting.” Each year’s structural deficit will have to be covered by “spending cuts, revenues increases [more taxes] and diversions from the surplus.”  But the current surplus of $6.2 billion is only a fraction of $15 billion in cumulative deficits.  And what happens if there’s a recession or a severe market downturn?

Murphy has been a status quo governor: he was elected with the support of New Jersey’s powerful public unions — led by the NJEA — and he has largely governed for their benefit.  The result has been unsustainable government spending.  Murphy’s proposed FY2026 spending is $58.1 billion — 67% more than Gov. Christie’s last budget of $34.7 billion.  That’s an average increase of 8.4% every year for eight years.  As the Sweeney Center shows, that’s unsustainable.

As the report notes, Murphy benefited greatly from revenue windfalls from federal COVID relief and record tax revenues from the ensuing economic and market rebound, but he failed to do the hard work of addressing New Jersey’s biggest problems: severely underfunded public pensions, recurring structural budget deficits, and extremely high taxes and cost of living that render the state uncompetitive and cause people and wealth to flee the state.  As the Sweeney Center makes clear, he is leaving the next governor a big mess.