How should we evaluate Gov. Phil Murphy’s fiscal stewardship of New Jersey over the past
eight years? Reading “Murphy Retrospective, Part III: By the Numbers – Taxes, Budgets, and Surpluses” without context suggests the governor made tough fiscal choices while holding the line on taxes.
The reality is more complicated. Consider:
Revenue, inflation and stagnation
Murphy said revenue increased $21 billion, with only a tiny fraction from tax increases. “That’s growth … that’s revenue,” he claimed. Actually, that’s inflation. Beyond the billions of dollars in new taxes largely directed at corporations, which make the state less competitive, several billion dollars of this growth was from price increases.
While Murphy is not responsible for federal policies leading to these increases, the state did
collect billions more from sales taxes as a result. Sales tax collections, borne primarily by New Jersey taxpayers, increased more than 12 percent, fueled by these increased prices. Income tax collections, which would measure real growth, increased only 3 percent during the past eight years. That is not growth; that is stagnation, driven by the significant tax burden and cost of operating a business.
Further, while attention is rightfully given to income tax rates, other taxes and fees have
exploded, increasing from just over $9 billion (inflation adjusted) in 2018 to over $15 billion in 2025. These nuisance taxes have the same effect as income and corporate taxes, driving up the cost of living and reducing New Jersey’s competitiveness. The state currently ranks 49th for business-friendly climate, according to one study.
Pension payments
Murphy deserves credit for making full pension payments, a sound financial practice. However, New Jersey’s systems are in such poor shape that these payments haven’t improved their financial health. When Murphy entered office, the combined funded ratio was 54%; by 2025, after years of full payments, it was effectively unchanged at 52%. This occurred because the system is financially broken, operating on a pay-as-you-go basis where new money is immediately spent on retirees rather than invested for growth.
While making payments was necessary, Murphy avoided the politically difficult but crucial
decision to enact structural reform. States such as Michigan, Rhode Island and Colorado have successfully managed similar burdens through reform efforts. Without it, pension costs will continue to crowd out other budget needs in the future and hamper state attractiveness for businesses and residents.
Bond rating
Murphy rightfully boasts about the state’s upgraded bond rating and deserves recognition for these efforts. These improvements should help temper future debt costs, yet New Jersey’s bond rating still ranks among the lowest of all states. While better than Illinois, New Jersey still ranks quite low on comparative credit quality nationally due to challenges around long-term fiscal sustainability that require significant reform efforts.
Spending
What are the fundamental long-term challenges facing New Jersey? Fundamentally, the state taxes and spends too much, and has a budget that is structurally unbalanced. While this is not something that has developed only over the past 8 years, progress in correcting this reality was minor.
State spending continues to grow faster than revenues. Between 2018-25, state spending grew by 25 percent while revenues only grew by 21 percent. Some of this spending growth was no doubt the result of state efforts to address the COVID pandemic; notably, the state was provided with over $16 billion in federal allocations as part of its response to the pandemic. The problem is that this federal money is now ending, but the state’s spending is not reverting to pre-pandemic levels.
The issue is not a lack of revenue — New Jersey already has a high tax burden and ranks 49th in tax competitiveness. Rather, it is that the state tends to spend more than it brings in, and public officials, including Murphy, have been unwilling to reduce real spending. Instead, elected officials have used gimmicks — like governors in the past did by skipping pension payments — or tax increases rather than focusing on real spending reductions that would boost competitiveness.
In conclusion
Despite the governor’s statement that, “Those numbers speak for themselves,” politicians must contend with tradeoffs and difficult decisions. Murphy deserves credit for pension payments and bond ratings, but New Jersey retains a structural deficit driven by high spending and an unreformed pension system. Only by reducing costs can the state attract more residents and businesses.
Thad Calabrese is a professor of public and nonprofit financial management at the Robert F. Wagner Graduate School of Public Service at New York University, where he currently serves as the head of the school’s finance specialization. He is a frequent contributor to Garden State Initiative.
