On Tuesday, April 1, State Treasurer Elizabeth Maher Muoio and Office of Legislative Services (OLS), Legislative Budget and Finance Officer, Thomas Koenig testified on the FY2026 budget recommended allocation of $58.1 billion, including a proposed $6.3 billion surplus and a slightly improved revenue forecast.
Mr. Koenig stated that State spending has exceeded and is likely to continue to exceed slowly growing revenues. He indicated that the FY2026 surplus is still substantial, but if trends continue it will likely be depleted by the end of FY2028.
Treasurer Muoio started by indicating that proposed funding cuts at the federal level could greatly affect the budget and specifically referred to an analysis conducted by the Department of Human Services estimating that federal cuts to Medicaid could reduce funding by approximately $10 billion. She continued to emphasize the unforeseen impact of federal funding cuts on the proposed State budget.
The Treasurer reported that the FY2026 budget includes a full pension payment of $7.2 billion marking the fifth consecutive full Actuarially Determined Contribution. The Administration reports that the total pension contributions since the Governor took office are expected to exceed $47 billion and four times the total contributions of the six previous governors. As expressed, a full contribution to the pension system will assist in the sustainability of the fund.
The proposed budget includes various tax policy changes including increases on sports betting, alcohol, realty transfer fees, cannabis and cigarettes.
In response to the tax policy changes, Senator Sarlo, Chair of the Committee, indicated that the proposal does not have enough support, and it is unlikely to be included in the final budget.
The Treasurer concluded by expressing concern about the State Health Benefits Plan (SHBP) and indicated that trends are expecting higher increases this year. While the rate-setting process does not begin until June, the Treasurer noted that trends suggest double-digit increases. Specifically addressing her concerns to the SHBP Local Government section, she reported that increases will likely be well above 20% for Plan Year 2026 as the premiums would have to consider a margin of 19.5% to restore the Claim Stabilization Reserve. These increases are before any benefit or service increases. The Treasurer implied that more information would be presented to the Committee in May. The Chair requested an in-depth presentation and discussion regarding SHBP at that meeting.
The Assembly Budget Committee will hear testimony from Treasury and OLS today. Both are expected to provide an update to the Senate Budget and Appropriations Committee on May 15.
Contact: Erin Knoedler, Legislative Analyst, eknoedler@njlm.org, 609-695-3841 x116.