Lawmakers helped Gov. Mikie Sherrill deliver a mixed bag in her first budget as governor, delivering on many priorities but still including hundreds of millions of dollars in spending on local projects she’d asked lawmakers to curb.

And, despite promises of transparency, the $60.7 billion deal still required closed-door, last-minute negotiations.

New Jersey leaders on Tuesday evening enacted the largest budget in state history mostly along party lines, just before a midnight deadline to avoid a government shutdown.

The governor sought to put the Garden State on firmer financial footing while advancing an affordability agenda.

The final product gives her notable wins, including record amounts of funding for property tax relief programs, education, health care and housing, alongside cutting legislative earmarks from prior budgets — grants for things like new firetrucks or park improvements or food banks.

But lawmakers reversed some of her proposed cuts and included hundreds of millions for local projects again in this year’s budget — and in a separate bill tacked $359 million onto the expiring budget.

“It's the most fiscally responsible budget passed in decades, and invests in the priorities that matter most to working families,” Sherrill said at a State House press conference with top lawmakers late Tuesday night.

But the legislative wins come at a cost.

The StayNJ property tax relief program for seniors has been scaled back for long-term stability, meaning some residents with higher incomes will now get lower payouts or be totally ineligible. The state will charge businesses more in taxes by eliminating tax breaks and creating new fees for large employers. The budget sets aside a record amount of funding for public schools, but the method of handing out that aid still favors urban districts who serve more low-income families and students with special needs. That means many rural and suburban districts still face difficult spending decisions.

StayNJ

A key sticking point in budget negotiations was Sherrill’s demand to reform the StayNJ program, which allowed seniors with annual incomes up to $500,000 to receive rebates for half of their property tax bill, up to $6,500.

StayNJ was sponsored by Assembly Speaker Craig Coughlin and enacted in 2023 to help seniors on fixed incomes afford to stay in their homes as New Jersey’s cost of living rises. The state mailed the first rebate checks to residents earlier this year.

But Sherrill said StayNJ was not sustainable because it offered the rebates to a wide range of people, including those with high incomes. She called for changes to lower the income eligibility and reduce the size of rebates. Lawmakers ultimately agreed; the budget amends the program to have a $200,000 income eligibility limit. The maximum rebate will still be $6,500, but benefits will be paid out on a sliding scale.

Coughlin said he was “pleased” with the reforms and said he hoped the program would remain stable and help senior citizens afford to live in the Garden State for years to come.

The reforms will reduce overall StayNJ benefits by 25% according to Chris Widelo, the state director of AARP New Jersey. In a statement, he said the organization, which lobbies on behalf of seniors, was disappointed by the outcome.

“Many older homeowners have already planned their household finances around the expectation of receiving the full benefit,” Widelo said.

Business taxes

The budget also includes new revenue by eliminating some business tax breaks. Businesses will not be allowed to write off more than $1 million in losses for the next three years. And corporations will not be allowed to use an alternative tax calculation that had been created to help small businesses in the wake of the 2008 recession.

Republicans warn the moves will either cause businesses to leave New Jersey, or ultimately make life more expensive for residents.

“ Businesses don't pay taxes,” said state Sen. Declan O’Scanlon, the top Republican budget officer in that chamber. “They pass those costs onto every single one of us in increased costs and costs of goods and services.”

The state is also placing a new fee on businesses that have at least 50 employees on Medicaid to raise money to help New Jersey cover its portion of the costs.

Jennifer Speigel, a policy analyst for the think tank New Jersey Policy Perspective, said in a statement the new fee risks causing businesses to discourage Medicaid enrollment and shy away from hiring low-wage workers. That would ultimately work against the goal of expanding health insurance access as widely as possible, she warned.

School aid

A record $12.4 billion in the budget is dedicated to aid for local school districts. But the state’s school funding formula that determines how that money is divvied up remains unchanged. That formula weighs factors like the population of low-income students, English language learners, and other students with special needs along with the local tax base’s ability to raise money for the school district.

The formula has been a top issue for Republicans, as 167 districts mostly in suburban and rural areas saw cuts to their state aid awards this year.

“These are real communities, real kids, real programs being cut because this budget leaves them underfunded by the state's own formula,” said Assemblymember Aura Dunn, a Morris County Republican who voted against the budget.

There have been bipartisan calls to reform the school funding formula, and Sherrill said she wants to see change. But it’s unclear if lawmakers will make that a priority later this year.

“ We spent more money on school funding than we've ever spent, and yet we still see many towns struggling,” Sherrill said. “So we are going to work to address the school funding formula going forward.”

Child care

A separate bill passed and signed Tuesday night expands New Jersey’s child tax credit by 25% for the next three years. The budget itself includes $1.4 billion for preschool programs and $582 million to fully fund the Child Care Assistance Program, a voucher program that helps low-income families afford daycare.

Sharon Levine, campaign director for Start Strong NJ, said in a statement the expanded tax credit would help New Jersey families, and the voucher program funding will bring stability to families and daycare providers that rely on the subsidy.

But Levine said the state is falling short by not expanding eligibility for the voucher program, leaving many families who struggle to balance child care with work unable to access the assistance.

Jersey City bailout

Jersey City is getting $120 million through the budget package to help local leaders grapple with a $255 million shortfall of their own. That state aid is split between a $105 million loan included in the supplemental spending bill, and $15 million in a grant through the new state budget.

Sherrill said it was important to structure the bulk of the package as a loan to protect New Jersey taxpayers.

“We still wanted to make sure that there was some skin in the game, so that will be paid back to the state,” Sherrill said. “But at the same time, we made sure that there weren't mass layoffs of firefighters and cops and people across the town.”

Immigration

A state program to provide legal aid for New Jerseyans at risk of deportation had its funding more than doubled in the new budget from $8 million to $20 million. The issue became a priority for Sherrill and lawmakers in recent weeks as protests over conditions inside the Delaney Hall ICE detention center thrust the federal government’s immigration crackdown into the spotlight.

Marleina Ubel, a senior policy analyst for New Jersey Policy Perspective, said in a statement the funding boost “is one action among many that the state will have to take to protect all New Jerseyans and defend the rights of every person living here.”

Republicans called it wasteful spending.

Lacking transparency

Critics say Sherrill’s pledge for a more transparent and orderly budget process was not met. The budget bill was introduced on Sunday evening just about 48 hours before the deadline to avoid a government shutdown. Assembly and Senate budget committees rushed to advance the bill in late night votes before Sunday turned to Monday, so the legislature could observe the single calendar day minimum required for the budget bill to sit before Tuesday’s final votes could be held.

O’Scanlon said the process had a “comical” lack of transparency.

But state Sen. Paul Sarlo, the chair of the Senate budget committee, pushed back on transparency complaints by noting the hours and hours of public testimony heard during multiple budget hearings through the spring.

And Sherrill said an online report card launched by her administration makes it easier for the public to understand what’s in the budget.

“I know the process needs work,” Sherrill said. “It takes too long. It could be much more transparent. But we took steps in the right direction this year.”