TRENTON, N.J. — New Jersey lawmakers are poised to send a $56.6 billion fiscal year 2025 budget to Democratic Gov. Phil Murphy this week, hiking taxes on high-earning businesses and funding for many state services and programs.

The annual spending plan is expected to get enough votes in the Democrat-led Legislature on Friday to reach Murphy’s desk. The state constitution requires a balanced budget to be enacted by July 1.

Here’s a closer look at what’s in the budget, which would spend 4.2% more than the plan Murphy signed last year.

ARE THERE ANY NEW TAXES?

Yes. The budget calls for increasing the state’s corporation business tax on companies that make more than $10 million a year. The current 9% rate would climb to 11.5%. Business groups say that would give New Jersey the nation’s highest tax rate and punish the state’s best corporate citizens.

WHY ARE TAXES GOING UP?

The higher rate was first proposed by Murphy as part of his budget proposal early this year to help New Jersey Transit. He’s billing the levy as a corporate transit fee to help the beleaguered agency, which has regularly had to use capital funds to help finance projects.

Critics note that the revenue won’t go to transit until next year. The current budget keeps it in the general fund, so when the money goes to transit next year, whatever is being paid for now out of the general would need to be replenished or cut, those critics say.

ARE THERE OTHER TAX CHANGES?

Yes. The budget calls for ending a sales tax holiday on school supplies that had gone into effect around the start of the academic year. That cut was first introduced in 2022 when the Democrats who control state government aimed to show voters they were making the state more affordable. Lawmakers didn’t explain this cut when they unveiled the budget Wednesday, but the additional revenue could help balance the budget.

WHAT ABOUT PROPERTY TAXES?

New Jersey has among the nation’s highest property taxes, levied by local governments to finance services and schools. The state dedicates some income tax revenue to fund local governments, which helps keep property tax rates from growing even higher. This budget calls for increasing state K-12 funding to fully implement an aid formula ratified by the state Supreme Court, raising such aid to more than $11 billion, up nearly $1 billion from the current fiscal year. The budget also has about $2.5 billion for direct property tax relief, continuing programs introduced in 2022 and 2023 to help residents, renters and seniors. The average property tax amount in 2022, which is the most recently available information, is about $9,500, according to the state.

WHAT ELSE IS IN THE BUDGET?

Quite a bit, given it funds all aspects of state government, from the executive departments to public colleges and universities, to the Legislature itself, which this year passed a 67% pay raise for lawmakers, their first since 2002, which goes into effect in 2026. Overall, spending is up just over 4% compared with the current fiscal year budget.

It includes a number of expenditures — sometimes referred to as Christmas tree line items because they’re viewed as gifts for specific constituencies. They include funding for ending homelessness, helping people re-enter society from prison, fire departments, arts programs and one city’s effort to teach life skills through tennis.

Republican lawmakers said they barely had time to review the budget and lamented that they weren’t sure what all was in it. Even Democratic Senate Budget Committee Chairman Paul Sarlo said the document is too vast to read line by line, but he supports it overall.

“I could not take a test and be quizzed on every line item because it would take hours and hours and days and months,” Sarlo said. “I try to look at it in totality and that’s where I think we’re at.”

In fewer than six years, water companies across New Jersey, Pennsylvania and Delaware have acquired more than two dozen water and sewer systems, as officials in small cities and towns struggle to fund the cost of repairing aging infrastructure and removing toxic PFAS chemicals.

McDonough said New Jersey American Water’s top priority in Salem is to address PFAS by installing a filtration system within 18 months. In 2023, the so-called “forever chemicals” were detected above state standards in one of Salem’s wells, which has since been shut down.

However, some Salem residents fear their water bills may increase in a city where the median annual household income is $26,000. Several states allow investor-owned utilities to consider the future value of a utility, pay above that price and then pass along those costs to consumers.

McDonough said there will be a two-year freeze on rate increases in Salem, and the company offers assistance to people struggling to pay their bills.

“Because we’re a large water operator statewide, we share the costs of capital across our entire footprint, and then, of course, our commercial customers on top of that,” he said. “So, we socialize those costs so that everybody’s bills are more affordable.”

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With less than a week before the end of the fiscal year, legislative committees were in Trenton on Wednesday to advance a budget bill.

The Assembly Budget Committee was scheduled to start at 2 p.m. – though it was later updated to 4:30 p.m. − and the Senate at 4 p.m., both were hours late to start as they considered the state’s spending plan for fiscal year 2025 – which runs from July 1 through June 30, 2025.

The bill language was not posted online but documents were obtained by reporters around 8 p.m. The bill was introduced as a $56.6 billion budget, an increase of about $728 million over the governor’s proposal and $2.3 billion more than the fiscal year 2024 budget.

Revenue projects indicate that the state will earn about $54.5 billion in the new fiscal year, meaning the budget functions at a deficit of $2.1 billion. Projects show a surplus of about $6.1 billion.

Not everyone was on board with the plan and the business lobbyists was among the most vocal.

Chris Emigholz of the New Jersey Business and Industry Associate called it a “bad budget,” pointing to the structural deficit in the bill.

“It’s bad for our taxpayers. It’s bad for our job creators. It’s bad for our fiscal responsibility,” he said.

Tom Bracken of the New Jersey Chamber of Commerce said that the “business community has run out of patience.”

But advocates like Peter Chen of the New Jersey Policy Perspective spoke in support of the bill.

“This is a budget that leads us on a path towards a better New Jersey, towards a New Jersey where the mighty and powerful are forced to pay what they owe to support the investments that help everyday New Jerseyans,” he said.

State Sen. Declan O’Scanlan, the Republican budget officer, said the “already bloated” budget is worse than it had been with the addition of discretionary spending items.

“The fact that we are massively increasing spending at a time when we have already done so over the last six years of this administration, is in many ways a runaway freight train,” he said. “In just the last week, we’ve added almost $700 million.”

State Sen. Paul Sarlo, the committee chair said that “no budget is ever perfect this is not either quite frankly” but that the process of creating a budget with two branches of government and two houses of the Legislature requires a lot of give and take.

He said there is supplemental spending but that many are “spending priorities” and “one time infrastructure” items and that they are a “very, very small components to this budget.”

Sarlo also candidly announced that he wished the corporate transit fee wasn’t included but he understands the “transit issue is looming and in order to stay competitive and get people to work you need a vibrant transit system.”

“No transit agency across this entire country is solely dependent on ridership,” he said. “Can we do better? We have to do better with transit.”

The bill was ultimately cleared in the Senate along party lines.

Gov. Phil Murphy proposed a $55.9 billion spending plan in February and then handed it off to the Legislature to figure out the details and after months of testimony and negotiations the budget appeared before committee.

Among the other bills to clear committee was a 2.5% corporate transit fee for businesses in the state earning more than $10 million. Details on that bill, sponsored by Senate President Nick Scutari, were scarce as well but the idea was first proposed by Murphy in his budget address in February.

Another bill geared toward providing medical debt relief also cleared committee despite testimony against it. Sarlo said that the bill would pass because it was a non-negotiable priority for the administration.

After clearing both committees, the budget is set to be voted on in full chambers on Friday. The governor has until midnight Sunday to sign the bill.