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The basics:

• April tax collections exceeded Treasury forecasts
• FY2027 structural deficit reduced below $1.5B
• Projected surplus increased to nearly $6B
• Administration proposed additional spending cuts

Gov. Mikie Sherrill’s administration announced May 19 that April tax collections outpaced expectations, allowing the state to further reduce its projected structural deficit while boosting the surplus in the proposed Fiscal Year 2027 budget amid continued economic uncertainty.

The administration said April collections exceeded Treasury forecasts, helping reduce the projected FY 2027 structural deficit by an additional $200 million to below $1.5 billion while increasing the projected surplus to nearly $6 billion.

“Increased revenue is welcome news, but we have to remain clear-eyed about the fiscal challenges ahead,” said Sherrill. “Real national and global uncertainty, from President Trump’s illegal tariffs to his ongoing war in Iran to federal cuts to Medicaid, will impact New Jersey’s economy as our state grapples with a serious structural deficit.

“I am making disciplined, responsible choices now to both protect our fiscal stability while continuing to create long-term opportunity for New Jersey families,” Sherrill added. “I will continue to fight for an affordability budget that drives down costs, reins in spending to reduce the deficit, and ensures every taxpayer dollar delivers real, meaningful returns for New Jersey’s future.”

Increased revenue is welcome news, but we have to remain clear-eyed about the fiscal challenges ahead.
– Gov. Mikie Sherrill

The updated proposal also includes an additional $50 million in spending cuts from the governor’s original March budget plan, lowering total proposed appropriations to roughly $60.68 billion. Administration officials said the reductions reflect an ongoing effort to tighten spending while preserving core priorities such as a full pension payment, school aid, property tax relief, NJ Transit funding and Medicaid.

Follow along

The administration noted that the changes are reflected in the New Jersey Report Card, a public-facing website launched by the administration, which they say is aimed at increasing transparency into the budget process.

“I’m pleased to report that because of a combination of additional cuts and higher revenues, the FY 2027 projected structural deficit has been further reduced by $200 million,” said State Treasurer Aaron Binder. “As we move forward with the budget process, we hope to identify additional savings opportunities with an eye toward further reducing the structural deficit.”

Binder told lawmakers during budget committee hearings this week the Treasury now projects total FY 2026 revenues of approximately $57.8 billion — about $337 million above earlier forecasts — while FY 2027 revenues are projected at $59.2 billion, roughly $163 million higher than anticipated during the governor’s budget message in March.

“The revenue collection patterns we discussed with you seven weeks ago have largely continued through the April filing period,” Binder testified to lawmakers. “There hasn’t been an ‘April Surprise’ either good or bad. Instead, we’ve seen more of the trends that Treasury and our colleagues at OLS had already been observing.”

Much of the improved outlook stemmed from stronger-than-expected Gross Income Tax collections, particularly April final payments and estimated payments tied to capital gains and business income. Treasury officials noted April Gross Income Tax collections increased nearly 5% year-over-year while sales tax revenues also rose sharply.

Remaining cautious

At the same time, Binder cautioned lawmakers against overconfidence heading into next fiscal year, pointing to global instability, inflationary concerns and volatile financial markets.

“We remain cautious about next April’s collections,” said Binder. “We’ve had two consecutive strong springs, and we’re facing real national and international headwinds.”

Assembly Speaker Craig Coughlin, D-19th District, applauded the updated projections and the administration’s budgeting approach in a statement.

“The latest revenue projections are certainly encouraging news for New Jersey and serve as yet another sign that the responsible approach we’ve taken to budgeting continues to put our state on a path toward long-term stability,” said Coughlin. “With revenues continuing to meet and exceed expectations and a reduced structural deficit, it is clear that our stewardship of the state’s finances positions New Jersey to navigate the evolving economic needs of tomorrow with even greater confidence.”

Coughlin added that lawmakers will continue focusing on “smart investments that grow alongside our communities while continuing to strengthen our state’s long-term fiscal health.”

Back to school(s)

Republicans, meanwhile, argued the improved revenue picture should immediately translate into greater relief for taxpayers and additional support for underfunded school districts rather than new spending initiatives.

Following updated projections from the Office of Legislative Services showing roughly a $500 million revenue increase, Sen. Michael Testa, R-1st District, who is a member of the Senate Budget and Appropriations Committee, called on Democrats to direct most of the additional money toward schools and tax relief.

“Underfunded schools should receive the lion’s share of this surprise revenue increase before Democrats waste it on politically connected projects, bloated government spending, and last-minute budget add-ons that taxpayers never asked for,” said Testa. School funding has been one of the hottest-button issues in New Jersey as a number of districts and lawmakers have bemoaned the school funding formula.

Underfunded schools should receive the lion’s share of this surprise revenue increase before Democrats waste it …
– Sen. Michael Testa, R-1st District

“New Jersey families deserve real relief and investment in our communities, not another round of backroom spending deals.”

Testa also urged the administration and Democratic lawmakers to pair the additional revenues with broader spending restraint proposals advanced by Republicans. He argued the state could fully fund schools while also reducing taxes and strengthening nonprofit support programs.

State health benefit plans

Binder also warned lawmakers that escalating health benefit costs remain one of the most serious long-term threats facing the state budget and local governments.

“These annual double-digit increases are threatening our fiscal health at all levels of government, and this cycle will continue until we work together to find a tenable solution,” Binder said of state health benefit plans. “The current system is unsustainable and without necessary changes, the financial health of all levels of government, and access to healthcare for the hard-working men and women we employ, are at risk.”

The latest revenue projections come as budget committee hearings wrap up and negotiations between the Legislature and Governor’s Office intensify ahead of the June 30 constitutional deadline to adopt a final state budget.