Gov. Sherrill Prepares State for Budget Cuts to Fix a $3B Structural Deficit

On Feb 26, 2026

Facing a long-term $3 billion structural deficit as she prepares her first state budget, Gov. Mikie Sherrill today said she will not raise taxes on New Jersey residents, but will look for savings, as she has already asked various state cabinet and departments heads to look for potential cuts in their respective operations.

On March 10, Sherrill will present the specifics of her FY2027 budget to the public, but her press conference at the State House today was meant to present a clear picture of the state’s fiscal problems: “Bottom line, we are facing a serious structural deficit,” Sherrill said.

If the state fails to address this overspending, the entire $7.2 billion state budget surplus will be gone at the end of FY2028, Sherrill said.

What makes this year’s budget planning difficult, according to Sherrill, are the Trump administration’s funding cuts where the state “is losing hundreds of millions of dollars that would have gone towards healthcare, housing, food aid, foster care, schools and infrastructure.” Additionally, the governor said that the “COVID relief party is ending after six years of cash flooding in from Washington that helped paper over some very real fiscal problems.”  Just as important, Sherrill blamed the administrations of past governors who have allowed for “business as usual” in Trenton while failing to plan for the long term.

She faulted past administrations for not making full payments into the state’s public employee pension system, which resulted in a $7.2 billion payment this past fiscal year. Meanwhile, New York State, which runs a larger public employee pension system than New Jersey, just paid $1.5 billion into its pension system.

“The reason we’re laying all of this out now is because we’re going to make the tough choices, because this is really mortgaging our kids’ futures … we are forcing our kids to take on this debt, and it’s just not fair,” Sherrill said.

“The state constitution requires us to have a balanced budget, so we clearly need to make changes to veer off this path,” added acting State Treasurer Aaron Binder.

Taking a deeper dive into the state’s fiscal problems, Binder said New Jersey is facing its $3 billion structural deficit for several reasons: One is the projected growth in critical areas such as Medicaid, school funding, public workers compensation and health benefits, and direct property tax relief; two is President Donald Trump’s One Big Beautiful Bill Act, which will result in more than $100 million in added state costs to the budget; and three, again, the decision made by past governors not to fully fund the pension system.

“If pension payments had been made in the past, [our current payments] would have been a little over $1 billion,” Binder said. “In this budget, we will have a $6 billion penalty for the missed payments of the past.”

Sherrill said her press conference was about “setting the table so that people can anticipate that this is going to be a very tough budget season. On March 10, we are going to present my vision of where I think we should go, but I’m also working closely with the Legislature.”

In a statement, Christopher Emigholz, chief government affairs officer at the New Jersey Business & Industry Association, said that the association and New Jersey’s business community strongly supports the message of fiscal discipline that Sherrill delivered today.

“The governor’s focus on responsible long-term budgeting, finding efficiencies and righting our fiscal ship without relying on more tax increases in an already overtaxed state is very welcome, appreciated and a necessary breath of fresh air for New Jersey taxpayers. … NJBIA stands ready to help the Sherrill administration with the responsible budgeting plan described today,” Emigholz said.

To access more business news, visit NJB News Now.

Related Articles: