When the fiscal year 2025 state budget was finalized in June, a $150 million fund dedicated to municipal aid was redirected to the General Fund. At the New Jersey League of Municipalities conference this week, mayors and legislators discussed efforts to restore this funding for fiscal year 2026. The task is expected to be challenging given the anticipated tight budget next year.
Christopher Emigholz, NJBIA Chief Government Affairs Officer, emphasized the importance of municipal aid for businesses: “This municipal aid is also a big deal for the business community. It is essentially property tax relief for all taxpayers including businesses instead of only for select homeowners, and businesses pay a lot of property taxes."
The Municipal Relief Fund Aid was initially established to address past diversions of energy tax revenues intended for towns. In fiscal year 2024, $150 million in energy tax receipts were returned to municipalities. However, this did not occur in fiscal year 2025 despite over $600 million being allocated to additional projects by Democrats who control budget appropriations committees.
Since 2002, more than $14 billion in municipal tax relief funds have been diverted under both Democratic and Republican administrations. Assembly Minority Leader John DiMaio expressed frustration with these diversions: “As a former mayor, I can tell you (having the municipal aid diverted) would piss me off because, frankly, it doesn’t belong to the state,” he said.
Assembly Majority Leader Lou Greenwald commented on what he sees as an ongoing issue with New Jersey's tax structure: “This is that never-ending tug-of-war about a broken tax structure that relies on property taxes to fund all of local governments.”
Senate Minority Leader Anthony Bucco and Senator Declan O’Scanlon sent a letter to Governor Phil Murphy urging him to restore municipal funds in his upcoming FY26 budget proposal. They wrote: “The aid cut will hit municipalities after years of high inflation... We have proposed billions of dollars in State budget savings... that have gone ignored.”
Deputy Majority Leader and Senate Budget Chair Paul Sarlo acknowledged disappointment over the FY25 funding cuts but highlighted other achievements such as full education funding and pension payments. He noted that restoring municipal aid remains a priority amid competing financial demands: “I’m going to warn everybody now – I think it’s going to be a very, very tight budget,” Sarlo stated.
