It’s the latest — and maybe biggest — sign that New Jersey’s state government is facing an increasingly tough financial picture.
Gov. Phil Murphy’s administration has ordered state agencies to freeze pay raises for some employees, curtail hiring, and plan for spending cuts, according to a pair of emails obtained by NJ Advance Media.
The belt-tightening comes as Garden State leaders navigate a structural deficit in the taxpayer-funded state budget and stare down potentially painful choices in a new spending plan that must be in place by July. It will be the final budget of Murphy’s two terms as governor.
Last week, Tim Hillmann, Murphy’s chief of staff, sent an email to the governor’s cabinet leaders asking them to take steps to “conserve state resources” that take effect immediately and come with “limited exception.”
That includes “pausing approvals for discretionary salary increases” for workers in their departments, including “outstanding requests,” Hillmann wrote in the Nov. 21 email, first reported by ROI-NJ on Monday. Raises required by law and under union collective bargaining agreements are excluded.
The email did not say which jobs or how many would be affected.
Hillmann also asked the agency leaders to “limit new hire requests to only those that are mission critical to the functioning of your department and necessary for health and safety.” That excludes hirings “already underway.”
The order comes seven weeks after the state Office of Management and Budget sent a separate email to the department heads ordering them to submit possible “budget savings” for the upcoming 2026 fiscal year state budget and identify ways to reduce their department’s expenses by 5%.
“We appreciate your assistance throughout this annual process, and all hope to achieve the same goal: continued fiscal health for the State of New Jersey while serving our many stakeholders,” read the Oct. 1 memo from Tariq Shabazz, the office’s acting director.
Murphy’s office confirmed the emails were sent but declined further comment Monday.
State spending has increased annually under Murphy’s watch the last seven years. The current $56.6 billion state budget that Murphy, a Democrat, signed in June is more than $20 billion more than the last, $34.7 billion budget under his Republican predecessor, former Gov. Chris Christie — a 63% increase.
Much of that is because Murphy and the Democratic-controlled state Legislature have increased funding for the state’s long-beleaguered public-worker pension system, and added money for school formula aid and tax-relief programs. There was also a $6 billion surplus in the current budget. And all of it has been bolstered by federal COVID-19 stimulus money.
Credit agencies have upgraded the state’s ratings during Murphy’s tenure, in part because of the pension boosts.
But the current budget calls for the state to spend about $2 billion more than it takes in from taxes and other revenue, meaning the state will potentially dip into its surplus to cover the deficit. And officials have warned the next budget — for the fiscal year that begins July 1 — could see an even bigger gap because of an uncertain economy and shrinking revenue, with pandemic aid running out.
Murphy will outline his spending goals in February during his next budget address and then negotiate a final plan with top state lawmakers in the coming months. It will be the last budget of his tenure because New Jersey’s governor is limited to two terms. Murphy is set to leave office in January 2026.
The governor has already told lawmakers he plans to cut spending in the next budget, two sources familiar with the talks told NJ Advance Media. The sources spoke on the condition of anonymity because they are not authorized to speak publicly about the discussions.
The fear, one source said, is that even if the state doesn’t spend more money, the budget’s surplus will shrink to $2 billion with a $5 billion structural deficit by the time Murphy departs. That means slashing spending — and programs — to close the gap is a real possibility.
Is there a chance there could also be tax hikes to curb the deficit?
”I don’t think anyone has fully taken any option off the table,” the source said. “(But) it’s not a problem you can fix by raising taxes.”
Spokespeople for both state Senate and Assembly Democrats declined comment Monday.
New Jersey Policy Perspective, a left-leaning think tank, released a report this month urging the state to enact several new progressive tax policies to inject about $4 billion into the budget and bridge the gap. Those include increasing the state’s sales tax, creating new tax brackets for millionaires, and reviving an estate tax, among other moves.
“New Jersey has to start raising more revenue, and it’s important to raise revenue in a fair way, said Peter Chen, a senior policy analyst for the group and the author of the report.
State Sen. Declan O’Scanlon, R-Monmouth, a Republican budget officer, said Democrats are going to “have to do the things Republicans have been talking about for years” — in other words, chop spending.
“But it’s gonna be more extreme,” O’Scanlon said. “It is heartbreaking.”
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Brent Johnson may be reached at bjohnson@njadvancemedia.com. Follow him on X at @johnsb01.
