Governor Mikie Sherrill delivers her first state budget address on Tuesday, and it could come with some hard truths. New Jersey faces a $3 billion structural deficit that will force spending cuts—a significant departure from the budget growth of recent years.

The problem is straightforward: New Jersey’s surplus is disappearing fast. State Treasurer Aaron Binder warned last month that the state is “projected to entirely deplete the surplus in two years,” according to reporting from NJ.com. 

Meanwhile, structural costs in education, health benefits, pensions, and tax-relief programs grow automatically each year, regardless of economic conditions.

Sherrill has already indicated she won’t raise taxes—eliminating one traditional avenue to addressing budget deficits. Instead, she’s promised cuts, though she hasn’t yet specified which programs will face the chopping block. That pledge has created uncertainty in Trenton as lawmakers prepare for what many expect to be a contentious budget season.

One program already under scrutiny is Stay NJ, a property-tax relief program for seniors that costs roughly $1.2 billion annually—about 2% of state spending. The program is popular but expensive, making it an obvious target for cuts. But not without political risk. 

Assembly Speaker Craig Coughlin championed the program. Cutting it could create friction with legislative leadership, according to New Jersey Globe. Others in Trenton have suggested tightening eligibility limits, but it would only partially solve the problem.

The Assembly’s progressive wing could complicate negotiations further. A bloc of Democratic members elected to office without traditional party backing may resist cuts to spending on urban areas or social programs. Some have pushed for raising the millionaire’s tax instead of cutting services, which Sherill has ruled out. 

For individual legislators, the politics of it matter. Under New Jersey’s new district-based election system, showing concrete results for constituents is critical. A significant cut to a program affecting a legislator’s district could invite primary challenges from opponents who are able to better address the issue. This dynamic could make reaching a consensus on any budget difficult. 

The clock is ticking. Sherrill’s March 10 address shortens the review period before the June 30 deadline when lawmakers must pass a balanced budget. If they miss it, New Jersey could face a government shutdown.

For now, we’re left waiting to see how Sherrill plays her cards. No matter the direction she takes, one thing is clear: the $3 billion structural deficit is not making her first months in office easy.