Mikie Sherrill puts fiscal restraint at center of her first budget for New Jersey

Gov. Mikie Sherrill entered office promising a more affordable New Jersey. Her first major test of that is here.

The Democratic governor on Tuesday unveiled a $60.7 billion state spending plan — which includes $2 billion in cuts and is $980 million more than the state’s current budget. Among the largest reductions is $500 million from New Jersey’s property tax relief program for seniors — a move that could challenge her campaign pledges of affordability.

The spending plan comes as Democrats across the country are focusing on an affordability message headed into the midterms — hoping it will secure majorities in Congress and down-ballot victories in Statehouses. And it comes as polling shows voters don’t trust President Donald Trump’s handling of pocketbook issues.

But promises of affordability are quickly running into the reality of choppy economic waters and rising costs of running the government. Sherrill said her cuts are needed to prevent New Jersey’s financial decline — recently, she warned that the state is projected to spend $3 billion more than it received in revenues. That gap is now expected to be $1.7 billion for the upcoming fiscal year under Sherrill’s plan.

“It’s time to close the deficit the right way, structurally, so we’re not just plugging new holes every year,” Sherrill said. “It’s a simple lesson we learn as kids: You can’t spend more than you earn.”

The high-profile speech also previewed the legislative agenda for the new governor. She promised to address rent-setting algorithms and a will usher through a “historic” reform bill on pharmaceutical middlemen known as pharmacy benefits managers (former Gov. Phil Murphy also made PBM reform a focus during his second term in office).

Sherrill’s push to cut funding for the senior property tax relief program, known as Stay NJ, could become an early political battle with the Democratically-controlled Legislature. Assembly Speaker Craig Coughlin, a Democrat, is the largest supporter of the tax program, which provides a maximum of $6,500 in property tax relief for seniors making up to $500,000 in the state. It was expected to cost the state about $1.2 billion a year.

Sherrill’s plan includes $700 million for Stay NJ, and would reduce the eligibility threshold to $250,000 and reduce the maximum benefit to $4,000 across the board.

And while lawmakers traditionally include last-minute add-ons to the state budget — amounting to hundreds of millions of dollars in special line item spending — Sherrill vowed to end that practice. She called out legislative leaders who sat behind her and Murphy — albeit not by name — for approving billions in new tax credits and new spending items last year.

“Our work starts by ending previous administrations’ bad habit of tacking last-minute giveaways onto each budget,” she said. “These days, we simply can’t afford that.”

The budget could be further complicated by federal funding uncertainties and a percolating war in the Middle East, which could disrupt state finances. Sherrill — who campaigned on pushing back against the president’s agenda — mentioned the president at least 10 times, according to her prepared remarks.

“The Trump Administration is recklessly slashing critical programs — from healthcare and housing, to food aid and foster care, schools and infrastructure,” she said. “And yes, Trump’s massive cuts are blowing an immediate hole in our budget, hurting New Jerseyans.”

The White House pushed back. “New Jersey’s chief challenge is that Democrats will do anything other than cut the state’s sky-high taxes and inordinate waste, fraud, and abuse in government spending," spokesperson Kush Desai said. "The Garden State will continue experiencing a population exodus if the best solution Democrats have to offer is blaming the Trump administration for not giving them more federal handouts.”

While Sherrill entered Tuesday promising no new taxes, her spending plan relies on approximately $750 million in new fees and scaling back tax deductions for businesses. One would tax businesses that employ at least 50 people on Medicaid but don’t provide health insurance benefits, which is expected to bring in $145 million in new revenues.

Still, the governor emphasized that there will not be taxes on “individual New Jerseyans.”

“Instead of asking taxpayers to foot that bill, this budget looks to large employers,” she said.

New Jersey’s fiscal reality is quickly complicating some of Sherrill’s campaign pledges. While she campaigned on increasing various tax credits — like the Child Tax Credit and Earned Income Tax Credit — they will remain flat.

In order to maintain state spending and limit tax increases, Sherrill is dipping into the state’s surplus, which will decrease from $7.3 billion from the current fiscal year to a projected $5.4 billion.

Sherrill’s topline investments in the budget include $7.3 billion for the pension fund, $12.4 billion for k-12 education and $1.4 billion for preschool aid and $7.2 billion in state spending for Medicaid.

Her budget now heads to the Legislature for weeks of public hearings. It must be signed into law by June 30.