Gov. Murphy’s Legacy: A Rotten Status Quo with Very High Government Spending and Taxes, Budget Deficits, and a Still-Broken Pension System

As Gov. Murphy leaves office — no doubt in pursuit of his larger political ambitions — Sunlight is going to highlight what a lousy, status quo governor he has been. In other words, Murphy was elected by and largely governed for the benefit of New Jersey’s rotten status quo: a special-interest-dominated political system where the government unions (led by the NJEA) launder tax dollars to elect pols like Murphy and then reap the benefits from ever-higher higher government spending funded by ever-higher taxes. New Jersey businesses and citizens lose, which is why they are heading for the exits. That’s the malign status quo that Murphy supported and the legacy he will leave.

Thankfully, a timely op-ed by NYU Professor Thad Calabrese published at BINJE.com hits some key points about the New Jersey economy, budget, and pensions, which put Murphy’s tenure in proper context.

Murphy’s tax hikes hurt businesses and the economy. Calabrese notes that the state’s $21 billion tax revenue increase under Murphy was mostly due to inflation, not the economic growth, which he sees as stagnant due to “the significant tax burden and cost of operating a business.”  Murphy really stuck it to New Jersey businesses by making his “temporary” surcharge permanent, and now New Jersey has the highest marginal corporate tax rate in the nation at 11.5%. Other taxes and fees have also “exploded,” driving up the cost of living and further reducing competitiveness.  Calabrese points to New Jersey’s rank of 49th for business friendliness (which we believe is New Jersey’s rank of 49th in the Tax Foundation‘s 2026 ranking of states).  We would add that New Jersey has been 49th or 50th in the Tax Foundation’s ranking for every year of Murphy’s two terms.

Murphy leaves a structural budget deficit because he spent too much. The reason New Jersey still has a structural budget deficit isn’t that New Jersey doesn’t generate enough tax revenues, it’s that under Murphy, the state has spent too much (Gov. Christie’s final budget was $35 billion, while Murphy’s was $59 billion, a 69% increase and about 40% above inflation). We would add that government unions always and everywhere want more government spending, so Murphy was taking care of his political pals.  And Calabrese reminds us that revenues were augmented by $16 billion in federal COVID money, which is going away. So Murphy is leaving large, structural budget deficits in his wake despite the federal windfall.

Murphy pumped $47 billion into the “broken” pension system but did not fix it. Calabrese’s analysis of Murphy’s approach to the New Jersey pension system is exactly right.  While he does give Murphy credit for injecting $47 billion into New Jersey’s ailing pension system, he correctly notes:

New Jersey’s [pension] systems are in such poor shape that these payments haven’t improved their financial health. [Emphasis added].

Indeed, when Murphy entered office in 2018, the system’s funded ratio was 54% (that is, 54 cents set aside for every dollar owed), by 2025 it was 52%. Calabrese nails it when he observes:

… the [pension] system is financially broken. operating on a pay-as-you-go basis where new money is immediately spent on retirees rather than invested for growth.

And finally, he accurately notes that Murphy “avoided the politically difficult but crucial decision to enact structural reform” of the pension system [emphasis added].  We would say that the decision was “politically difficult” because Murphy’s government union pals — especially the NJEA — did not want to reform the broken system but rather wanted Murphy to pump more money into it to keep it afloat. So he dutifully threw $47 billion of good money after bad to accommodate them. But the pension system is still broken and underfunded, and its annual costs “will continue to crowd out other budget needs … and hamper state attractiveness for businesses and residents.”  Again, good for Murphy’s government union pals but terrible for everyone else.

Already some ominous signs for New Jersey’s post-Murphy economy. Just as Calabrese was sounding the alarm on New Jersey’s post-Murphy economic and budgetary condition, Brenda Flanagan of NJSpotlight News seemed to confirm him. She wrote about impending layoffs at New Jersey corporations and whether they portend a recession for 2026. Almost 100 New Jersey companies have filed Worker Adjustment and Retraining Notifications, which would result in 13,000 eliminated jobs. An analyst at a major rating agency sees New Jersey “in a precarious spot” that is “dangerously close” to a recession. She quotes Rutgers’ professor Will Irving as seeing a potential state-level recession by the middle of next year when those  “significant job declines” kick in.

Of course, Murphy will be long gone by then, off pursuing his own political ambitions, while his state remains stuck with its malign status quo — a status quo that Murphy benefited from and helped support. Great for Murphy and his government union pals.  Terrible for the state.  That’s quite a legacy, governor.