Gov. Phil Murphy on Tuesday unveiled a $55.9 billion budget, up about 5% over his previous year's proposal, calling for nearly $1 billion more in K-12 school funding as well as about $1 billion in new taxes on high-earning businesses to fund transit.

Murphy, a two-term Democrat, cast the budget as the fulfillment of campaign pledges to identify a recurring source of funding for New Jersey Transit and to fully finance a state formula for schools that's never before been fully implemented.

“Our budget will ensure New Jersey retains its proud reputation as the best place anywhere to raise a family,” he said.

The governor's seventh budget comes amid declining revenues in the current fiscal year, something Murphy attributes to a hangover from 2022. The budget proposes drawing down the state's surplus of about $8 billion to more than $6 billion to help close the gap.

Murphy campaigned in 2017 on fully funding a school aid formula, which the state supreme court ratified in 2009 and that never was fully implemented. The proposal calls for increasing aid from nearly $10.8 billion to $11.7 billion, but Murphy also stressed the incremental increase of school funding since he took office. Aid had been largely flat at $8 billion annually throughout much of Republican Chris Christie's two terms.

The governor casts increased school aid as both a boon for schools and students and as an important factor in reducing pressure on local property taxes — the lion's share of which go to schools. More state aid for education means towns can keep property taxes down, the argument does.

The budget also takes aim at another campaign promise Murphy had made: setting up a funding source for the state's often beleaguered transit system. The system has regularly had to use capital funds just to keep up operations, limiting resources for system-wide improvements. To help close the gap Murphy is proposing a 2.5% tax on business profits of companies that netting more than $10 million annually.

The proposal comes after a temporary business tax increase ended at the end of last year. That surcharge affected some 3,100 businesses, according to the administration, while the new proposal would levy taxes from about 600 firms. Murphy said small and medium sized businesses would not be impacted.

Business leaders decried the increase, arguing the governor essentially went back on a commitment to keep the corporate tax rate down.

“When you make promises that drive investment, and then renege on them a few weeks later, it goes well beyond creating terrible policy,” said Michele Siekerka, president of the New Jersey Business and Industry Association.

Advocates for groups representing workers who use transit said the increased taxes were necessary.

"Governor Murphy’s move to reinstate a partial corporate business tax to fund NJTransit is an important step to make the wealthiest corporations — now reaping record profits -- pay their part to keep our state afloat," said Sara Cullinane, the director of Make the Road NJ, an immigrants rights advocacy group.

The state's budget has grown significantly since Christie left office after signing a $34.7 billion spending plan. The state takes in income, sales and business taxes to fund a mix of programs and services, including state government itself but also education and health care funding.

Murphy is also proposing to continue a property tax relief plan first initiated in 2022 that doled out up to $1,500 in tax rebates to families that make up to $150,000, as well as aid for renters. As initially envisioned the program helped under a million households. The new budget would increase the benefit to 1.3 million households, Murphy said, though it's not clear exactly how.

The budget isn't final and must first pass through the Democrat-led Legislature, which has until June 30 to pass a spending plan to Murphy.