Murphy finally admits he spends too much of our money

💲 Phil Murphy has increased state spending $20 billion

💲 Now, Murphy says the state is running out of money

💲 NJ faces spending cuts and tax hikes to pay for Murphy's spending spree

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

He has rejected such talk for years, but Murphy has reportedly ordered his cabinet members to freeze some state workers raises, put a hold on new hires and find ways to cut departmental budgets.

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

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

Department heads were already told to prepare to reduce their budgets by 5% heading into 2026 budget year.

There have also been reports that Murphy has already warned legislative leaders he intends to reduce spending in his next, and final, budget.

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

AP/Townsquare Media illustration

Too little, too late

For Murphy to suddenly realize he has been spending money the state doesn't have comes at a time when the he is already spending $2 billion dollars more in this current budget than the state will collect in taxes and fees.

He has argued the state can tap into it's surplus to bridge that gap.

Yes, the state can dip into the surplus, but that fund is designed to cover unexpected expenses, and is not intended to pay for budgeted expenses.

Even if Murphy is able to hold spending steady, or even reduce it a bit, the state's projected deficit for 2026 could exceed $5 billion.

But that wont be Murphy's problem. He will leave office and dump that huge deficit into the lap of the next governor.

What Murphy could do before he leaves office, is force more tax hikes and fee increases in his final budget.

However, Democrats in the legislature may be unwilling to accept that as they face re-election in 2025.

How did this happen?

It is far easier to spend money, than save it.

Even as some Democrats in the legislature told me they were shocked at the level of spending and worried many of the programs Murphy was touting as tax relief cannot be funded in the future, they voted for them anyway.

Now those bills are coming due.

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

It is the Democratic leadership and rank-and-file legislative members that have been complicit in allowing state spending to soar. An ineffective Republican minority has been unable to blunt the increases.

An historical perspective

The last budget signed into law by Gov. Chris Christie for fiscal year 2018 came in at $34.75 billion.

Christie's first budget, for fiscal year 2011, came in at $28.36 billion and was $1.4 billion less than the previous year.

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

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

Part of the reason Christie, a Republican, was able to keep overall spending low was by shorting payments into the fund that pays pension and health benefits to public workers and not meeting obligations under the state's school funding formula.

Murphy takes spending to new heights

When Phil Murphy proposed his first budget, he boasted about correcting the cruel and unfair policies of the past.

In doing so, he embarked on an historic spending spree that his critics (and many economists) say is unsustainable.

Murphy's fiscal year 2019 budget came in at $37.4 billion. At the time, Murphy proclaimed, "It is a budget that puts New Jersey families ahead of the wealthy and special interests – and that recognizes that we cannot build a brighter future by acting timidly and thinking small."

In terms of spending, Murphy has gone big

Murphy's current budget comes in at $56.6 billion.

In pushing for support of that spending plan, Murphy argued he was being more fiscally responsible by fully funding pension and health benefits and fully meeting New Jersey's school funding formula.

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

That is an average increase of nearly 9% per year, and well ahead of the cost of inflation and more than the tax relief he promises.

Raising taxes to provide tax relief

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

However, that relief is not distributed equally among Garden State residents and often does not keep up with the increase in New Jersey's tax burden.

Programs such as ANCHOR, Senior Freeze, StayNJ and child tax credits being funded in Murphy's latest budget are popular, but families already struggling under the crush of the nation's highest property taxes and inflationary pressures are offered only a Band-Aid when their family budgets are hemorrhaging money for expenses.

Those programs also come with a cost. Murphy's budget's have raised taxes and fees and eliminated some programs to provide the money.

Murphy even admitted that was flawed policy. "It's kind of crazy to raise taxes to deliver tax relief," Murphy said in 2023.

Critics say Murphy's policies are no more than a redistribution of wealth, and not true tax relief.

The bottom line

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

Spending at the levels Murphy has taken New Jersey are not sustainable without either a dramatic increase in revenues or one-time revenue boosts through things like borrowing.

That has been the one-shot revenue boost of choice of many governors, not just Murphy, but borrowing adds to the state's overall debt.

As the debt rises, so do the service payments on that debt. (Think interest on a credit card.)

Murphy has one final budget to prepare before he leaves office.

Even if he manages to reduce spending compared to current levels, he has left New Jersey with a structural deficit that will saddle future generations with suffocating debt.

A deficit of $5-6 billion is staggering for a state of just over 9 million people.

If history repeats itself, the Democratic leadership will again have its hand out asking you to pay more.

It is that continual drain that is driving even greater numbers of people to leave New Jersey where taxes and fees are not nearly as suffocating.

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

That will be somebody else's problem.

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