Credit: (AP Photo/Julio Cortez)

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For the 17th year in a row, the New Jersey Legislature diverted tens of millions of dollars meant for clean energy investments to plug shortfalls in their general state budget.

On Monday, Gov. Phil Murphy signed into law the fiscal year 2026 budget totaling around $58.8 billion, the largest in New Jersey’s history. Tucked in the law is the reallotment of the state’s Clean Energy Fund (CEF), a climate investment effort meant to get clean energy projects like wind farms, solar arrays and transportation electrification off the ground.

Lawmakers diverted a total of $190 million from the CEF, with $140 million going to the New Jersey Transit budget and $50 million to the general state budget. It is the second-largest CEF diversion in the state’s history, behind only a $255 million transfer under former Gov. Chris Christie in 2014.

Started in 1999, the Clean Energy Fund is a dedicated pool of money collected from utility ratepayers through a societal benefits charge on their energy bills. It is used to support statewide programs that promote energy efficiency, renewable energy and emissions reductions. But money has frequently been pulled out of it to plug unrelated budget gaps, like state building utility costs or park maintenance.

The latest diversion in the climate fund ran against Murphy’s 2017 campaign promise that he would “immediately [stop] the raid of the Clean Energy Fund.” By “raid,” the then-candidate was referring to using the CEF for purposes it was not intended to fund.

Big diversion, big surprise

Murphy’s administration has since seen CEF transfers of at least $832 million. The Legislature passes the budget, but Murphy, who is term-limited and in his final year as governor, had the option to veto individual parts of it.

“This time surprised us by nearly tripling the raids,” said Alex Ambrose of New Jersey Policy Perspective, a nonpartisan think tank. In 2024, the state reallocated $71.6 million from the Clean Energy Fund — the smallest amount it had diverted in 13 years.

State Sen. Andrew Zwicker, a Democrat, flagged the transfer during the budget debate in the Senate, stressing the importance of state investments for clean energy amid federal hostility to and withdrawal of climate funding.

Among the frozen federal funds for New Jersey is at least $104 million intended for electric vehicle chargers that the state hoped would encourage residents to go electric, as New Jersey is the most highway-dense state in the United States after Rhode Island, and it counts the transportation sector as its largest source of greenhouse gas emissions.

“Given what is happening in Washington right now … if we really are going to ensure that every single person in this state has access to clean air, clean water — that the electrical prices that we’re all talking about, that we can continue to do something about — it is critically important that we make these investments,” Zwicker said.

Why did Clean Energy Fund supporters agree to the diversion?

Zwicker said he and other Democrats pushed back against the CEF withdrawal during their internal deliberations, but he said that ultimately, lawmakers had to approve the transfer to prevent a bloated deficit and a government shutdown.

“When you’ve got hundreds of millions of dollars sitting in a fund and a deficit that we’re constitutionally required to ensure we have a balanced budget, there’s a lot of pressure to find that money in existing pots of money,” Zwicker said.

Asked for comment, the governor’s office said Murphy and lawmakers “made a number of difficult fiscal decisions” so they could “align state spending with revenues.”

Credit: (Edwin J. Torres/NJ Governor’s Office)

As Murphy signed the budget, President Donald Trump and Republicans in Washington gave New Jersey lawmakers another thing to worry about: a sweeping tax-and-spending package — known as the “One Big Beautiful Bill” — that included deep cuts to clean‑energy incentives and health-care spending. Health-care spending figured prominently in the New Jersey state budget discussions, as the federal bill could mean cuts of up to $5.2 billion of Medicaid funding for New Jersey, according to projections by the state.

The state had a $2.1 billion structural deficit the previous year, and to balance the budget, as the law requires, lawmakers had to dip into other funds. This year, the deficit is $1.5 billion.

Major transfer to NJ Transit

Meanwhile, the $140 million transfer to New Jersey Transit is the highest ever, doubling the $70 million reallotment in the previous year.

The transfer came a month after NJ Transit engineers mounted a strike that crippled the train network and coincided with Murphy creating a tax to further fund the transportation agency. A fare increase also kicked in the day after Murphy signed the budget into law.

In justifying previous transfers from the Clean Energy Fund, New Jersey officials argued that investing in the train system reduced tailpipe emissions by keeping commuters out of gas-powered cars.

With the big CEF withdrawal, federal uncertainty and rising energy prices, Zwicker said he and his allies have stronger “political momentum” now to pass and sign bills that expand clean energy in the state when legislators return to session in November. Among them is a bill that would authorize a new generation of nuclear reactors and a bill that would automate the processing of paperwork for residential solar panels.

However, the window for action is short. The “lame-duck” session ends in early January when a new Legislature and a new governor take office.