Official Site of The State of New Jersey

Treasurer Muoio Testifies Before Assembly Budget Committee

(TRENTON) – State Treasurer Elizabeth Maher Muoio and Department of the Treasury officials testified before the Assembly Budget Committee at the State House today, providing a detailed update on revenue projections for the remainder of Fiscal Year 2025 through Fiscal Year 2026.

The following is a copy of the testimony, as prepared for delivery:

ASSEMBLY BUDGET COMMITTEE HEARING
State Treasurer Elizabeth Maher Muoio
Testimony as Prepared for Delivery
May 14, 2025

Good morning Chairwoman Pintor Marin, Vice Chair Park, and members of the committee.

Thank you for the opportunity to come before you today to discuss the updated revenue forecasts for FY2025 and FY2026 budgets, as well as the Department of Treasury’s budget.

As always, with me today are my colleagues – Deputy Treasurer Aaron Binder, Acting Director of the Office of Management and Budget (OMB) Tariq Shabazz, Martin Poethke, the Director of our Office of Revenue and Economic Analysis (OREA), Associate Deputy Treasurer and Chief of Staff, Jo-Ann Povia, Assistant Treasurers Andrea Spalla and Michael Kanef, and many from our Treasury leadership team. They have all played a pivotal role this year and over the past seven years. I would like to thank each of them, as well as my front office, and the staff of OMB, OREA, and our other divisions, many of whom have joined us here today or are listening in remotely, for their professionalism and untiring commitment throughout this past year.

As this will likely be my last time before this committee as Treasurer, I would like to once again acknowledge all that we’ve accomplished together over the past seven years. Though we have not always agreed, I believe that by working together we have set New Jersey on more sound fiscal footing, while at the same time making our state more affordable for all New Jerseyans.

First, I’d like to present the updated revenue picture for FY2025 and FY2026, and then I will close by talking a little about what Treasury has accomplished over the past seven years.

Six weeks ago, our revenue forecast suggested a positive outlook for the current fiscal year but indicated the need for some caution heading into FY2026. With the April tax returns now largely in, that outlook, which was shared by our colleagues in OLS, can mostly be confirmed. Tables showing the specific details for both fiscal years are included with my testimony.

For FY2025, we are increasing our total forecast by $388.5 million above our previous estimate back in February. We now project $55.3 billion for the current fiscal year, driven by higher collections from the Gross Income Tax (GIT) and the Pass-Through Business Alternative Income Tax (PTBAIT), but also partially offset by lower Corporation Business Tax (CBT) collections. These three tax revenues account for the bulk of the overall forecasting revisions.

For next year, FY2026, we are increasing the aggregate forecast by a total of $323.2 million to $57.1 billion.

One of the largest upward revisions will not come as a surprise to members of this Committee, since it was discussed it during the opening hearings. The PTBAIT has been over-performing expectations since the middle of March, when that revenue’s annual final payments came due. OLS had preliminary readings about this growth from the State’s accounting system, which guided their forecasts at the time. The PTBAIT accounted for 90% of the forecasting difference between Treasury and OLS. That revenue growth continued with estimated payments in April.

Therefore, we are increasing our PTBAIT forecast by $461.3 million in FY2025 and by $306.6 million in FY2026. After seeing collections decline during the first half of the fiscal year, we are now seeing a jump in payments, including thousands of taxpayers who did not make PTBAIT payments last year.

Likewise, we are increasing our GIT forecasts by $486.9 million in FY2025 and by $200.5 million in FY2026. The GIT is the traditional source of the “April Surprise” and it generated strong growth last month. Final payments for Tax Year 2024 are up by over 20% and quarterly estimated payments are up more than 25%. Incomplete preliminary data from tax returns suggests that net (capital) gains were up by over 60%, one of the strongest growth rates in decades, while interest income and dividends also grew by double-digit rates. Taxpayers had a good year in 2024, and we are seeing that in the April collections.

However, we have also seen that such strong years are often followed by payment declines the following April. Given that historical pattern, and the economic uncertainties looming in international trade, our GIT growth rate of 9.9% in FY2025 moderates to 2.7% for FY2026.

While the PTBAIT and the GIT have performed strongly this spring, the CBT has come up short of expectations. We have thus reduced our forecasts for the CBT by $508.5 million in FY2025 and by $165.6 million in FY2026.

April CBT collections declined by 18% from last April, as both estimated and final payments fell below target. Digging into Tax Year 2023, corporate tax returns have shown a sharp rise in the utilization of Prior Net Operating Losses (PNOLs) and Net Operating Losses (NOLs), which are up over 60% and account for most of the CBT decline. This surge stems from revisions made via the omnibus CBT reform package from 2023, P.L.2023, c.96, which allowed unitary filers to pool their losses from all members and offset the entire net income of the combined group not just the income of the member that generated the losses. We have seemingly endured the largest revenue impact associated with the enhanced utilization of PNOLs in FY2025, however, we expect this effect to taper off over the coming fiscal years as PNOLs are exhausted and newly generated NOLs are subject to federal limitations.

Likewise, we are also reducing our forecast for the Corporate Transit Fee (CTF). The FY2025 estimate is down $237.4 million, while the FY2026 estimate is down $53.6 million. We still expect a total CTF collection of $813.9 million in FY2026, which by law, is dedicated to support NJ Transit.

The other large revenue I have not yet mentioned is the Sales Tax. That is because there really hasn’t been a surprise in that revenue source. This tax continues to grow by about 3% each month, and was actually up 3.6% in April. We are increasing that forecast by a relatively small $28.3 million for FY2025 and maintaining the FY2026 Sales Tax forecast of $14.5 billion. While consumer confidence has ebbed in recent national surveys, shoppers appear to be matching expenditures roughly with price inflation. Retail sales forecasters still project growth in the 2.5%-3.0% range for the coming year.

Most of the other revenues are performing close to expectations. We have modestly increased Realty Tax, Inheritance Tax, and regular Casino Tax forecasts, while slightly reducing Insurance Premiums Tax and Sports Betting Tax revenues. These are relatively small adjustments due to trends.

In conclusion with regard to our revenue update, this has been a good spring filing season overall, with the positives outweighing the negatives. We will enter the new fiscal year with a solid foundation, while keeping an eye on national and international economic developments.

As you are all aware, we continue to face massive budgetary uncertainty at the federal level. And as you have heard both during my earlier testimony, and from my cabinet colleagues over the past several weeks, the potential hits in terms of direct federal funding could be in the range of multiple billions of dollars. And that is excluding the potential effects of trade policies on our port-based economy, which I addressed when I first appeared before you earlier this spring.

Our Office of Management and Budget has been tracking various notices received thus far by State offices, and the potential impacts spread across the state - including potential changes or cuts to student mental health services, teacher training, electric vehicles, transportation-related funding, and nutrition assistance for schools, to name a few. Friday, we received word that funding for the State Digital Equity Planning and Capacity Program, which was to be used to expand broadband connections across the state, was cut. These cuts are on top of the billions in potential catastrophic Medicaid, SNAP, and other federal funding cuts shared with you by the Commissioner of Human Services during her earlier testimony, which are being discussed in the House this week.

Clearly, this situation remains in flux, and it is difficult to know now, in May, the ultimate effect on our state and our residents. But, as we continue to develop and finalize the FY2026 budget, we need to be cognizant of and prepared for the financial stresses we could find ourselves faced with during the upcoming fiscal year.

The other pressing issue we continue to face is the cost of health care. As we discussed at length when I was before you last month, we remain deeply concerned about increasing costs to the State, to participating local governments, school boards, public employees, and taxpayers of the health benefits plans. Those cost increases, particularly in the SHBP Local Government section, have become unsustainable. The situation is complex and there are no easy or quick solutions. But we welcome the opportunity today to discuss these issues and answer your questions on that and related topics.

With that, I want to once again thank OREA and OLS not just for their wonderful work over the past year, but for their work throughout the past seven years and nine budgets. These have been challenging times for revenue forecasters across the country, and both OREA and the OLS revenue teams have done an exceptional job closely tracking every data point available and providing decision makers, like all of you on this committee, with reliable and well-supported revenue projections.

I’d now like to talk about some of Treasury’s accomplishments during our time here.

DEPARTMENT HIGHLIGHTS

From day one, Treasury has played an instrumental role in leading some of the most high-profile initiatives undertaken by the State. Time and time again, the public servants who make up the Department of the Treasury have delivered strong results while exhibiting the highest level of professionalism. I am proud of the work we have accomplished over the past seven plus years.

The following are some examples of those efforts:

The Division of Taxation has made historic strides in delivering property tax relief to millions of New Jerseyans, including successfully implementing the landmark ANCHOR program, which has put nearly $6.5 billion back in the pockets of eligible homeowners and renters to date. The team at the Division of Taxation has consistently looked for ways to improve the process and make applying for this benefit as convenient and secure as possible. Taxation rose to the challenge by creating an auto-file application system, which matches taxpayer data to determine eligibility and aids in the distribution of millions of payments to taxpayers automatically. Now, the overwhelming majority of eligible ANCHOR recipients receive their benefit without lifting a finger.

In addition to ANCHOR, Taxation, working in close collaboration with the Division of Revenue and Enterprise Services (DORES), was tasked with overseeing a significant expansion of the Senior Freeze Property Tax Reimbursement Program to over 78,000 more residents, as well as starting implementation of the forthcoming Stay NJ program. The latter required creating a new single combined application, known as the PAS-1, to allow qualifying seniors and Social Security recipients to apply for ANCHOR, Senior Freeze, and Stay NJ through one application. Taxation successfully launched the PAS-1 in February, taking a crucial step in simplifying how many senior taxpayers apply for and receive property tax relief in New Jersey.

In further modernization efforts, Taxation is currently working on the implementation of its new integrated tax system known internally as STAR – State Tax And Revenue – but will be known publicly as the New Jersey Tax Portal. This is a significant project and one of the most important new technology systems in State government. This streamlined platform will replace the current outdated legacy system that manages all taxes, fees, and programs administered by Taxation, transferring these functions to a modern system designed to improve efficiency and functionality. The new portal will be phased in over five years, with the first phase officially kicking off this month.

DORES also created an automated self-service platform that allows New Jersey businesses to file virtually all registry documents – including formation filings, Uniform Commercial Code financing statements, and notary public commissions – electronically, thereby facilitating the flow of commerce in New Jersey. The Division additionally implemented a proactive noticing system for registry filing requirements, which is helping over one million businesses comply with their tax and legal filing requirements.

Connecting service delivery and program innovation, DORES implemented new and expanded online business certification and search services, and modernized its digital service channels for the small, woman, minority, and veteran/disabled veteran, LGBTQ+, and socially and economically disadvantaged business enterprises.

These efforts by both Taxation and DORES to update and streamline our filing services for taxpayers and business registrants, while flying under the radar of the average news cycle, are critically important steps that will provide the next administration with far more efficient platforms to better meet constituent needs.

Now I’d like to turn attention to our Division of Property Management and Construction, or DPMC. One of the Division’s largest accomplishments is evidenced in the building we sit in today – the completion of the Executive State House Renovation. As you all know, this years-long, multi-faceted effort resulted in the beautiful, renovated State House we have the pleasure of conducting the public’s business in today, with modern enhancements like a new security screening building and upgrades to the courtyard. And the Building Authority has announced that the sidewalk outside the State House’s front entrance should reopen to the public by the end of the month.

DPMC played a vital role in the State’s response to COVID-19 pandemic, including securing facilities for use as vaccine mega-sites and field medical stations. During this time, the Division helped oversee two new additions to Trenton’s skyline: the construction of the new Division of Taxation and Department of Health buildings.

Looking towards the future, DPMC is hard at work preparing for the 250th anniversary of our nation’s founding next year, overseeing renovations of nine Revolutionary War Sites throughout New Jersey.

Moving ahead to Treasury’s Division of Pensions and Benefits, the Division has played a crucial part in delivering one of the Murphy Administration’s highest priorities: fully funding our State pensions system. After decades of underfunding, DPB successfully advocated for and administered four consecutive years of fully funded pension contributions. It is worth noting that, since the Governor took office in 2018, total pension contributions are on track to exceed $47 billion – nearly four times the $12.2 billion total contributions of the previous six governors combined. DPB’s hard work behind the scenes has made it possible for the State to keep its promise to public retirees and their families.

Additionally, DPB continues to deliver comprehensive, high quality health care services to plan members. The Division facilitated implementation of an additional third-party administrator contract, bringing Aetna on board alongside Horizon to broaden plan options for the 777,000 individuals covered under the State Health Benefits Plan and School Employees Health Benefits Plan.

Our Unclaimed Property Administration also has had unprecedented success over the past seven plus years, returning money and property to thousands of residents. With the continuous support of this Administration to help expand outreach opportunities, the UPA has returned over $1.47 billion to rightful owners since 2018.

Through April 2025, the UPA has successfully returned over $194 million to rightful owners, and the Division is on track to have yet another record-setting year and return approximately $225 million in property to owners and another $235 million to the State’s General Fund.

Recognizing a need, in June 2023, the UPA also launched its first annual Municipalities Outreach Project, which has since returned approximately $7.3 million to municipalities throughout the state.

This Administration prioritized and focused on our pension funds and other short- and long-term investments as we have sought to shore up our finances despite facing a period of significant financial uncertainty caused in part by a once in a generation pandemic. To that end, the Division of Investment has guided the pension fund through challenging investments markets, including in 2022, when both the historical inverse correlation of fixed income and equities broke down, and currently with volatility at historically high levels. The Division has delivered a particularly strong performance over the last two years of 10.74% (net) and 9.06% (net) for FY2024 and FY2023, respectively.

To expand the pool of money managers the State deals with, the Division of Investment created an Emerging Managers program, initially in the Alternatives asset classes, through selecting and working with program partners to identify investment firms to participate in the program. The Division hosted two Emerging Managers Symposiums, gathering investment managers from across the globe to hear from existing emerging managers and other experts on how to succeed as an emerging manager. This effort has been successful, and DOI is now expanding the Emerging Managers program to Emerging Advisers in the public markets.

During our tenure, the Division also successfully prepared, organized, and executed on the transition of $20.8 billion in assets to the Police and Firemen’s Retirement System of New Jersey (PFRSNJ) on April 1, 2024, in accordance with the “PFRS Act”.

Our Office of Public Finance (OPF) also has contributed greatly to our State’s financial health. Since 2018, the OPF has managed $16 billion in refunding bond transactions, saving the State $1.3 billion on a net-present-value basis.

As a result of the decisions made by this Administration and the hard work by the team at OPF, as of June 30, 2024, the State’s aggregate bonded debt (direct and indirect bonds, capital appreciation bond accretions, unamortized premiums, etc.) had declined to $39.7 billion, the lowest level since June 30, 2012.

Turning now to our Division of Purchase and Property, DPP has seen tremendous growth in awarding State contracts for essential goods and services, with the number of awards rising 205 percent from last year and 97 percent from 2023. Solicitations have also increased, rising 28 percent compared to 2024 and 165 percent compared to 2023. These milestones can be attributed to DPP’s comprehensive efforts to improve staff retention and recruitment and strengthen inter-agency partnerships and training initiatives.

Next, I’d like to highlight the New Jersey Lottery. Every year since FY2019, the New Jersey Lottery has contributed in excess of $1 billion to the State pension system, playing a crucial role in Governor Murphy’s promise to fully fund the pension system.

During our time here, the Lottery implemented a comprehensive contract management system over the Lottery’s sales and marketing vendor, Northstar. The Division also negotiated an amendment to the Northstar contract governing the formula for calculating Northstar’s incentive compensation, which has saved the State more than $48 million since 2019.

Lottery also has implemented numerous improvements over State-controlled lottery operations, including finance and collections, prize payments, and contract management that have improved the quality of service for players, such as allowing players to be paid prizes through ACH bank transfers rather than with paper checks.

To speak to some of the work of the Treasurer’s Office, in 2022 my staff launched NJ FinLit, a free financial wellness platform available to all New Jersey residents. The website features financial education courses with personalized action plans on topics like budgeting, mortgages, and health care, as well as a suite of customized tools to help users assess savings goals, budgetary needs, retirement readiness, and more. Recently, the Treasurer’s Office partnered with the Department of Education to introduce the platform to teachers instructing financial literacy in high school classrooms, with the goal to enhance student learning with a State-backed resource. This partnership has been an outstanding success, and we look forward to continuing to work with DOE and other stakeholders to expand access to comprehensive financial wellness education.

The last division I’d like to highlight is the one perhaps most vital to the State budget process; none other than our Office of Management and Budget. As many of you know, for OMB, work on the State budget never stops. Crafting a responsible spending plan is a year-round effort that requires the collaboration between every State agency, the public, and you as our legislative partners. And as we all learned during the pandemic, budget work requires significant pivots – or, in the case of 2020, the development of an extra, entirely new budget – and throughout this Administration, the team at OMB has navigated the unprecedented with grace, professionalism and an unrivaled work ethic. I hope you’ll join me in saluting their hard work as well as the work of their partners at the Office of Legislative Services who also play a crucial role in crafting the annual State budget.

It has been my privilege to serve the state of New Jersey as Treasurer these past seven years. I would like to once again thank the more than 3,000 employees of the Department of the Treasury for the hard work, dedication, and professionalism they display every day. They continue to meet every challenge and deliver the very best results.

I am happy to take questions at this time.

Read the FY2026 Budget