When Governor Brendan Byrne was sworn into office in January 1974, he inherited the 1974 fiscal year budget from his predecessor, Governor William T. Cahill. New Jersey had passed ten consecutive budgets with double-digit growths in spending. Byrne’s first budget, passed in the summer of 1974, continued the steady expansion in state spending. However, in late 1974 the economy began to falter, creating a budget deficit and forcing cutbacks in state expenditures. In Byrne’s second budget, for fiscal year 1976, the governor passed the first spending cuts the state had seen in more than twenty years.
While forced to cut the budget to meet the challenges of slower economic growth within the state, Governor Byrne also had to satisfy a Supreme Court-ordered increase in education spending. In response, he proposed and, after a tough fight, gained legislative approval for the state’s first income tax. The increase in revenue produced by the new tax allowed state spending to again increase, easing the pressure on the budget. Byrne’s next several budgets resumed the levels of growth the state had been accustom to experiencing. The 1977 fiscal year budget grew by 28% over the previous year’s level, and the 1978 fiscal year budget expanded by another 16%. Once in his second term Byrne eased the pace of growth, keeping the rate of expansion below 10% for three successive years. In his final year in office, Byrne passed a $5.7 billion dollar budget, spending almost twice the amount that was expended in his first budget.