Gov. Phil Murphy, stung by his own party's cutthroat politics, led New Jersey to the brink of a shutdown last year when fellow Democrats blocked his tax increases. This time, budget negotiations are fraught with even deeper fiscal and political peril.
Income-tax collections, the state's biggest revenue source, were down 6% this fiscal year through January, and S&P Global Ratings says even an April windfall may not close the gap. At risk is Mr. Murphy's promised $3.2 billion payment, a record, to a pension system that's among the worst-funded among U.S. states. He also has yet to resolve funding issues for New Jersey Transit.
At the same time, 80 of 120 state lawmakers face November elections. Democrats likely will be reluctant to dip into voters' wallets with Mr. Murphy's disapproval rating on the rise, residents' sourness on the state at an all-time high, and their perennial cost-of-living gripes magnified by a new cap on state and local tax deductions. The combination could undercut the party's gains from the 2018 national election, which handed control of the House of Representatives to Democrats and unseated all but one New Jersey Republican.
"They support tax increases at great risk to their political careers," said Senate President Steve Sweeney, a Democrat from West Deptford who led the blockade of a millionaire's tax and some other Mr. Murphy initiatives last year. "This state could easily go back to the Republican Party if we don't pay attention and focus on fiscal health."