Legislative analysts report small revenue uptick but warn fiscal 2026 outlook remains uncertain

Doctor Mendez of the Office of Legislative Services told the Assembly Budget Committee that updated forecasts put total state collections at $55,400,000,000 for fiscal 2025 and $57,060,000,000 for fiscal 2026, a two‑year upward adjustment of roughly $97,000,000 (0.1%). "We are now projecting 55,400,000,000.0 in total collections for fiscal 25 and 57,060,000,000.00 for fiscal 26," he said.

The adjustment reflects stronger-than-expected gross income tax (GIT) receipts and weaker corporate business tax (CBT) collections. OLS reported that GIT collections outpaced last April by $670,400,000 (about 18.7%), boosting year-to-date GIT growth to about $1.6 billion (10.4%). By contrast, April CBT collections fell about $226,900,000, or roughly 18.3%, versus the prior year.

Doctor Mendez told lawmakers that part of the CBT shortfall stems from the phase‑out of a CBT surcharge and its partial replacement with a corporate transit fee; he added that OLS and Treasury research teams (including ORIA) are examining how 2023 tax‑law changes and unitary reporting rules have shifted taxable bases across jurisdictions. "There's a lot to be learned still on this," he said, describing the tax‑law and reporting changes as drivers of shifting CBT receipts.

Committee members pressed presenters on the fiscal implications. One assembly member noted that organic revenue growth is running near 1% while proposed spending is increasing by about 3%, and asked how long the state could sustain spending above recurring revenue. OLS witnesses said the state’s surplus—which was referenced in testimony at roughly $6.3 billion—provides a finite cushion but that tapping reserves is a policy choice tied to priorities. "Whether it's advisable or not is another matter," a witness said, urging legislators to weigh purpose and long‑term sustainability.

Members also questioned whether New Jersey’s revenue mix—particularly its strong exposure to the financial sector—makes the state more sensitive than others to national market swings. OLS answered that New Jersey’s economy is comparatively dependent on financial services and therefore can be more exposed to market volatility than the national average, though national trends matter everywhere.

On personnel budgets, Assemblyman Simon Freiman asked about departments’ aspirational requests for new headcount. OLS said a rough order‑of‑magnitude for unanticipated salaries and wages could run into the hundreds of millions and suggested some aggregates might be on the order of $100 million, while noting past years sometimes saw lapses and over‑budgeting in salary lines.

The presentation concluded with OLS urging caution in building the FY2026 budget: adopt modest revenue assumptions, preserve reserves where appropriate, and monitor the evolving effects of tax‑law and market dynamics. Treasury was scheduled to present next at 11:00 a.m.

The meeting’s next procedural step was the Treasury presentation; no formal votes or motions were taken on the revenue update.