RELATED: Murphy wants to penalize N.J. businesses that don’t offer employees health care

Gov. Phil Murphy will reveal a state budget Tuesday that reduces spending on health care for New Jersey’s government workers by $800 million, alleviating at least some pressure on the state to hike major taxes this year, NJ Advance Media has learned.

Though total spending is likely to be higher than this year’s $37.4 billion budget, sources familiar with the spending plan said the governor will announce more than $1 billion in spending reductions to begin closing a budget deficit and stem the rising cost of health care.

They include reducing health care spending on public workers by 16 percent and reducing state operating costs by more than $200 million, the sources said.

Those spending reductions are not enough to close the deficit entirely or pay for higher pension costs, and sources told NJ Advance Media the progressive governor will once again seek to increase taxes on the state’s wealthiest taxpayers to generate $447 million in new tax revenue.

Murphy, a Democrat, hinted as much in a speech last week and an op-ed Saturday, in which he telegraphed that his budget proposal would maintain his “commitment to tax fairness," a phrase that’s become synonymous with raising the top marginal tax rate on income over $1 million.

Murphy campaigned on an ambitious plan to increase spending on education, transit and government worker pensions. And he was counting on a strong economy and new tax revenue to bankroll that progressive wish list.

His first budget was a knock-down, drag-out fight with the Democratic-controlled state Legislature that nearly resulted in a state government shutdown. Negotiations went down to the wire, and in the end they agreed to raise the top marginal tax rate on income over $5 million and impose temporary surcharge on corporate tax liabilities, as well as new taxes on ride-sharing, rentals and e-cigarettes.

Murphy has said in recent months that he may seek additional tax increases.

But the governor is under pressure from legislative leaders of his own party to cut spending. Both state Senate President Stephen Sweeney, D-Gloucester, and state Assembly Speaker Craig Coughlin, D-Middlesex, have suggested they have little appetite for more tax increases.

Murphy’s efforts to find savings could make Sweeney and Coughlin more willing negotiating partners. Sweeney, who is pursuing his own big-ticket overhaul of state spending, has said he won’t agree to hike taxes without seeing significant structural spending cuts first.

During last year’s budget address, Murphy stressed that he would be looking throughout state government to find operational efficiencies And in a weekend op-ed published by NJ.com, Murphy said his approach to his second budget “begins with achieving real, significant, and lasting savings and efficiencies that will allow us to do more to build our future.”

Sources familiar with the budget told NJ Advance Media that mandate generated nearly $212 million in reduced spending, including $20 million by improving data sharing among state offices that would, for example, allow Medicaid access to income data.

Notably, the sources said, Murphy will announce $800 million in reduced spending on health care for public workers, one of the state’s largest and fastest-growing expenses. Employee health care will cost $3.2 billion this year and would have risen to $3.5 billion in the fiscal year beginning July 1. Instead, Murphy’s administration was able to keep the costs to $2.7 billion, sources said.

Murphy expects to save $61 million by auditing the insurance rolls and rooting out ineligible dependents, $7.9 million by auditing claims processed by the current pharmacy benefits manager, and $12.5 million by shifting Quest Diagnostics, the popular diagnostic lab, in network, among other changes, including rebidding the state’s contract for a pharmacy benefits manager.

A source familiar with the budget said those savings could be accomplished administratively, but another $217 million in cuts the administration believes it can find next year would require cooperation from public labor unions.

The governor, who ran as an ally to public labor, has had some success here already.

Murphy previously struck a deal with education groups to move retired school employees onto a Medicare Advantage plan, saving a projected $196 million next year. Prior reforms to limit soaring compound medications and slash out-of-network payments to physical therapists, acupuncturists and chiropractors should save $115 million, the sources said.

His state treasurer, Elizabeth Muoio, said at an event in January that all department heads had been asked to cut back, though she warned many state offices had been “bled dry” of resources under former Gov. Chris Christie, a Republican.

“We know the fiscal challenges we have ahead of us. Our department directors know the fiscal challenges we have ahead of us,” Muoio said. “The problem they’re trying to balance is they have been sort of bled dry in terms of having resources put into them the past eight years.

Samantha Marcus may be reached at smarcus@njadvancemedia.com. Follow her on Twitter @samanthamarcus. Find NJ.com Politics on Facebook.