Gov. Mikie Sherrill of New Jersey released a budget proposal on Tuesday that would slow the rate of state spending, trim the deficit, increase taxes for some companies and require other businesses to pay more for employee health insurance.
Ms. Sherrill’s proposed $60.7 billion spending plan — her first since taking over in January as governor — would also reduce a tax cut that older New Jersey homeowners began benefiting from this year. Changes to that program, known as StayNJ, would also mean that fewer affluent homeowners would qualify.
Ms. Sherrill, a Democrat, had telegraphed her plan to reduce spending weeks ago, saying that New Jersey was on track to allocate $3 billion more than it expected to take in over the next several years unless lawmakers made difficult choices.
“To get to affordability, we have to start with responsibility,” Ms. Sherrill said in a joint session of the State Legislature in Trenton.
One of the biggest changes contemplated would be to StayNJ, a popular tax-reducing measure first approved in 2023 as a way to entice older residents to remain in New Jersey. Under the program, homeowners 65 or older with an annual income of $500,000 or less are eligible for a $6,500 tax cut, starting this year.
Ms. Sherrill has suggested making only families that earn less than $250,000 eligible and capping the annual benefit at $4,000. Those changes would save roughly $500 million.
The governor used her first major policy speech to highlight several priorities she identified while campaigning for governor, including her goal of making government decision-making more transparent and addressing the state’s soaring energy costs.
“Government hasn’t been working the way it can. The way it should,” Ms. Sherrill said. “And here in New Jersey, a broken budget is at the heart of so much of that. For too long, too many in Trenton have taken the easy way out — opting for a quick fix, instead of laying the foundation for a solid future.”
Businesses would also be able to claim fewer tax deductions under Mr. Sherrill’s plan. For example, deductions for net operating losses would be temporarily capped at $1 million a year, a change expected to generate about $485 million. Businesses would also be charged a cost-sharing fee if they do not offer health insurance, yet have at least 50 employees who take advantage of NJ Family Care, a publicly funded insurance plan.
“There were a lot of painful decisions,” Aaron Binder, the state’s treasurer, said on Monday about the budget, which must be adopted by July 1.
The budget for the current fiscal year is $59.8 billion, up from $39 billion in 2019. Ms. Sherrill’s proposal would increase spending by 1.6 percent — far less, Mr. Binder noted, than the average 6.8 percent rate of spending growth in each of the past eight years. Analysts project that the budget would shrink the long-term gap between revenue and spending to $1.6 billion, down from $3 billion.
The governor’s release of a spending blueprint is the first step in what is typically a monthslong negotiation with the State Legislature.
“This is the budget we can afford,” Ms. Sherrill said. “If there are things you think we need to add, come to me with places we can cut. It’s simple math: Any additions require subtractions.”
Philip D. Murphy, a fellow Democrat who was governor for two terms, was barred by term limits from running for re-election in November. Ms. Sherrill’s decisive 14-point win over her Republican opponent, Jack Ciattarelli, represented the first time since 1961 that either party had held control of the governor’s office in New Jersey for three consecutive terms.
But Ms. Sherrill’s victory also means that when she blames predecessors for the state’s fiscal woes, she is taking indirect aim at her own party, and the Democrats who have long held a majority in the State Legislature.
Republicans in the Legislature have for years warned that the growth in state spending was unsustainable.
Ms. Sherrill has said her administration will unveil an online tool next month that will allow residents to view the draft budget and follow along as changes are made. It is part of a campaign promise she made to increase government transparency.
There is also legislation pending, pushed by a Democratic newcomer in the State Assembly, Andrew Macurdy, to shift the state toward a multiyear approach to budget planning.
“Businesses do this,” Mr. Macurdy said. “Other states do this. The idea is just to forecast down the line. What effect are the decisions you’re making today going to have in the future?”
During her campaign, Ms. Sherrill stressed her goal of freezing utility costs in New Jersey, where rates have increased more sharply than in most other parts of the country. Her administration has ordered the Board of Public Utilities, the governing agency, to reduce consumer fees by an amount equal to the rate of any increase to the electricity costs.
“When everyday expenses keep rising faster than paychecks, and leaders don’t respond, people lose faith in the idea that government can work for them,” she said.
Tracey Tully is a reporter for The Times who covers New Jersey, where she has lived for more than 20 years.
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