New Jersey Gov. Mikie Sherrill on Tuesday unveiled a $60.7 billion budget proposal for fiscal year 2027 that seeks to balance new investments in education, health care and affordability programs with nearly $2 billion in spending cuts aimed at addressing long-term structural deficits.

The proposal — Sherrill’s first since taking office earlier this year — frames the budget as an effort to confront rising costs for residents while reshaping state government operations and preparing for potential federal funding disruptions.

“This budget uses every tool available to take on rising costs, invest in families, and make government more accountable,” Sherrill wrote in her budget message to lawmakers.

The plan would allocate $60.7 billion in total appropriations, supported by about $59.1 billion in anticipated revenue, and includes a projected ending surplus of roughly $5.36 billion.

At the center of the governor’s plan is a broad effort to ease the cost of living in one of the nation’s most expensive states.

Nearly $4.2 billion would be dedicated to direct property-tax relief programs, including the ANCHOR program, Stay NJ and Senior Freeze. The programs together are expected to reach more than 2 million residents, according to the administration.

Sherrill is also proposing revisions to the Stay NJ program, lowering the income eligibility threshold to $250,000 and capping the maximum benefit at $4,000 — changes the administration says will ensure the program remains financially sustainable.

Overall, 47 percent of the budget — about $28.7 billion — would support direct or indirect property-tax relief, including school aid and municipal assistance.

The proposal also addresses rising energy costs by expanding programs designed to offset electricity price increases and accelerate new power generation projects.

Education funding represents one of the largest components of the proposal. The budget allocates $22.5 billion for pre-K through 12 education, including $12.4 billion in formula aid, the highest level of school funding in state history.

Preschool funding would rise to $1.4 billion, a roughly 9 percent increase, while $15 million would be invested in high-impact tutoring programs designed to help students recover from pandemic learning losses.

Higher education would also see continued support, with more than $3.3 billion directed toward colleges, universities and student aid programs, including the Tuition Aid Grant program and initiatives that provide tuition-free community college for low-income students.

Health care spending remains a major driver of the state budget. The proposal includes $7.2 billion in state funding for Medicaid, which provides coverage for more than 1.8 million New Jersey residents, including about 850,000 children.

The administration also projects $7.6 billion in health benefit costs for state employees and retirees, a 10 percent increase over the previous year, highlighting the growing pressure of health care costs on the state’s finances.

Additional spending includes: $582 million for child care assistance, expected to support about 77,500 children; $25 million to expand rapid rehousing programs to combat rising homelessness; and $52 million for reproductive health and family planning services statewide.

The proposal also expands Family Connects NJ, a statewide nurse home-visiting program for new parents, with an additional $12.8 million to allow the program to operate in all 21 counties.

A central component of the budget is a $7.3 billion pension contribution, representing the full actuarially recommended payment — a move the administration says is intended to address long-standing pension liabilities.

The administration argues that the payment marks a major step toward fiscal stability after decades of underfunding.

Still, the proposal includes difficult choices, including nearly $2 billion in spending reductions and efforts to increase revenue by closing corporate tax loopholes and shifting more health care costs onto large employers whose workers rely on Medicaid.

The proposal also reflects growing tension between state leaders and Washington over federal policy changes.

The administration says the budget includes more than $100 million to help counties handle new administrative costs tied to federal changes to the SNAP food assistance program.

Officials also warn that federal changes to health care funding could reduce hospital support by $3.3 billion in the coming years, placing additional pressure on the state budget.

Beyond social spending, the budget includes several initiatives aimed at modernizing government and boosting economic growth.

Among them: Creation of a Chief Operating Officer position to streamline state operations; Funding for a Permitting Dashboard to track development approvals and reduce delays; and expanded support for small businesses through the Business Action Center.

The budget also reduces business registration fees and expands procurement assistance for minority- and women-owned businesses.

Sherrill’s proposal now heads to the Democratic-controlled state legislature, where lawmakers will debate spending priorities ahead of the July 1 start of the fiscal year.

The governor framed the budget as the first step in a longer effort to restructure the state’s finances while confronting the affordability crisis facing many residents.

“This is the most fiscally responsible budget proposal this state has seen in years,” Sherrill wrote, “but it’s just the start.”