by Erica Jedynak, NJPI Board Member
New Jersey is currently sitting on a fiscal time bomb. Despite record-shattering $58 billion budgets, we are staring down a $1.5 billion structural deficit for FY2026. The “one-shot” federal pandemic funds have dried up and our cash reserves are being drained. Despite this, the appetite for spending in Trenton remains insatiable.
For too long, the answer from the State House has been to “tax our way out of it.” However, one cannot tax your way to prosperity when families are already fleeing for more affordable states. At the New Jersey Policy Institute (NJPI), we do not just analyze the problem. We look for the “do-able” solutions.
If we want to make New Jersey affordable again, we must stop treating the state budget like an unlimited credit card. Here are five concrete, viable ways New Jersey can reduce spending and prioritize residents this year:
- Sunset Non-Recurring “One-Shot” Programs
The era of “free” federal money is over. During the pandemic, New Jersey expanded its baseline spending by billions while propping up new programs with temporary federal aid. Now that those funds have expired, Trenton must resist the urge to fold those costs into the general fund. We must conduct a rigorous “sunset audit.” If a program has not shown measurable, high-impact results, it should not be backstopped by New Jersey taxpayers.
- Equality of Access: Lift the Caps on Interdistrict Public School Choice
In New Jersey, a child’s zip code remains the single greatest predictor of their educational future. This is fundamentally an issue of equality. We have a proven, popular, and bipartisan tool already in place: the Interdistrict Public School Choice Program. However, the state has kept this program frozen for a decade. This has left thousands of students on waiting lists even when receiving districts have the empty desks and the desire to welcome them. We should immediately lift these arbitrary caps and clear the waiting list. Every child deserves equal access to the public education that best serves their needs, regardless of their family’s income or home address.
- A Win-Win for Health Care: The HSA Revolution
Health benefit costs for state and local employees are rising at a rate that far outpaces inflation, creating a projected $180 million liability this year alone. However, reform does not have to mean “less.” By incentivizing Health Savings Accounts (HSAs) paired with high-deductible plans, New Jersey can achieve a genuine win-win.
First, HSAs offer unprecedented flexibility for the employee. Unlike traditional “use-it-or-lose-it” plans, HSA funds are portable, stay with the employee forever, and grow tax-free. They act as a powerful retirement vehicle, empowering workers to build a healthcare nest egg that they (not the state) control.
Second, these plans lower annual premiums and administrative overhead for the state, potentially saving hundreds of millions.
- Re-Evaluate the NJEDA’s “Winner-Take-All” Subsidies
The New Jersey Economic Development Authority (NJEDA) often functions as a “shadow government.” It directs billions in tax credits and subsidies to hand-picked industries in a race-to-the-bottom among states. Instead of spending taxpayer dollars to “buy” business growth at great cost, we should focus on broad-based tax relief that benefits every small business on Main Street. By auditing the NJEDA’s long-term commitments and halting new corporate welfare, we can redirect funds toward core public services and truly lower costs for New Jerseyans.
- Launch the “Open for Business Commission”
Regulatory hurdles are a hidden tax on every New Jerseyan. We propose the creation of the Open for Business Commission. This would be a body of citizens and legislators (so that the commission has an ability to make change) tasked with a simple mission: identify and eliminate the state-level regulations that make it impossible for a new business to open or a family to build a home. It is about shifting our state’s culture from “No, because…is” to “Yes…” This commission would audit every department to ensure we are facilitating opportunity, rather than standing in its way.
The Bottom Line
Government fiscal health is the bedrock of a free society. It creates a landscape of opportunity for the next generation, rather than a legacy of debt. Every dollar wasted on a failed subsidy or a bloated state bureaucracy is a dollar taken from a working mother in Jersey City or a small business owner in Morristown.
