Murphy finally admits he’s spending too much of our money

💲 Phil Murphy increased government spending by $20 billion

💲 Now Murphy says the state is running out of money

💲 New Jersey faces spending cuts and tax increases to finance Murphy’s spending spree

After increasing spending to record levels every year since taking office, Gov. Phil Murphy is now warning that New Jersey is running out of money.

He has rejected such discussions for years, but Murphy has reportedly ordered his Cabinet members to freeze some pay raises for state employees, hold back new hires and find ways to cut department budgets.

It’s a huge turnaround for Murphy, who increased spending by 63% as governor.

According to NJ.com, a memo went out from Murphy’s chief of staff to department heads. The email, obtained by NJ Advance Media, ordered a conservation of state resources.

Department heads have already been told to prepare to cut their budgets by 5% through fiscal year 2026.

Murphy has reportedly already warned lawmakers that he intends to cut spending in his next and final budget.

That would be a first for a governor who has embarked on a historic spending spree to finance a progressive agenda that has even alarmed some of his Democratic allies.

AP/Townsquare Media illustration

Too little, too late

Murphy’s sudden realization that he’s been spending money the state doesn’t have comes at a time when he’s already spending $2 billion more in this current budget than the state collects in taxes and fees.

He has argued that the state can use its surpluses to fill this gap.

Yes, the government can draw on the surplus, but this fund is intended to cover unexpected expenses and is not intended to cover budgeted expenses.

Even if Murphy manages to keep spending stable or even reduce it somewhat, the state’s projected deficit for 2026 could exceed $5 billion.

But that won’t be Murphy’s problem. He will leave office and leave the huge deficit to the next governor.

What Murphy could do before he leaves office would be to push through more tax increases and fee increases in his final budget.

However, Democrats in the Legislature may not be willing to accept this as they face re-election in 2025.

How did that happen?

It’s much easier to spend money than to save it.

Even when some Democrats in the House told me they were shocked by the level of spending and feared that many of the programs Murphy touted as tax breaks would no longer be able to be funded in the future, they voted for them anyway.

Now these bills are due.

That’s what happens when you borrow money to pay for things you can’t afford, and Murphy has done that every year since he’s been governor.

It is the Democratic leadership and rank-and-file members of the legislature who have been complicit in allowing government spending to skyrocket. An ineffective Republican minority failed to blunt the increases.

A historical perspective

The last fiscal year 2018 budget signed by Gov. Chris Christie was $34.75 billion.

Christie’s first budget for fiscal year 2011 was $28.36 billion, down $1.4 billion from the previous year.

This was the last time spending was actually reduced year-over-year.

During his eight years as governor, Christie increased state spending by just over $7 billion, or about 8% over that period.

Christie, a Republican, was able to keep overall spending low in part by cutting payments to the fund that pays pension and health benefits to public employees and by defaulting on his obligations under the state’s school funding formula.

Murphy takes spending to new levels

When Phil Murphy proposed his first budget, he boasted that he had corrected the cruel and unfair policies of the past.

In doing so, he launched a historic spending spree that his critics (and many economists) consider unsustainable.

Murphy’s fiscal year 2019 budget was $37.4 billion. At the time, Murphy announced, “It’s a budget that puts New Jersey families above the wealthy and special interests – and that recognizes that we can’t build a better future by acting timidly and thinking small.”

When it comes to spending, Murphy has made great strides

Murphy’s current budget is $56.6 billion.

Murphy pushed for support of this spending plan, arguing that it would be more fiscally responsible by fully funding pension and health benefits and fully meeting New Jersey’s school funding formula.

However, Murphy has increased spending by more than $20 billion since taking office.

That’s an average increase of nearly 9% per year, well above the cost of inflation and more than the tax relief he promised.

Tax increases to reduce taxes

Murphy has proposed billions of dollars in tax cuts in his various budgets. That includes $3.5 billion in his latest spending plan.

However, this relief is not evenly distributed among Garden State residents and often does not keep pace with increases in New Jersey’s tax burden.

Programs like ANCHOR, Senior Freeze, StayNJ and child tax credits funded in Murphy’s current budget are popular, but are only offered as emergency relief to families already struggling under the burden of the nation’s highest property taxes and inflationary pressures, if your family budget suffers as a result of wasting money on expenses.

These programs also come with costs. Murphy’s budget raised taxes and fees and eliminated some programs to provide the money.

Murphy even admitted that this was a flawed policy. “It’s kind of crazy to raise taxes to provide tax relief,” Murphy said in 2023.

Critics say Murphy’s policies are merely a redistribution of wealth and not real tax relief.

The end result

Regardless of whether you support Murphy’s policies or not, it ultimately comes down to the numbers.

Spending at the level Murphy has reached in New Jersey is not sustainable without a dramatic increase in revenue or one-time revenue increases through things like borrowing.

This was the one-time revenue increase of the choice of many governors, not just Murphy, but the borrowing increases the state’s overall debt.

As debt increases, service payments on that debt also increase. (Think interest on a credit card.)

Murphy must prepare a final budget before he leaves office.

Even if he succeeds in reducing spending from current levels, he has left New Jersey with a structural deficit that will saddle future generations with crippling debt.

A deficit of $5 billion to $6 billion is staggering for a state with just over 9 million residents.

If history repeats itself, the Democratic leadership will reach out to you again and ask you to pay more.

It is this constant outflow that is driving more and more people to leave New Jersey, where taxes and fees are not nearly as onerous.

But that won’t be Murphy’s problem. He made millions on Wall Street. He will leave New Jersey, perhaps for his posh luxury villa in Italy, and not have to worry about the debt he has saddled that state with.

That will be someone else’s problem.

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