Eliminating trains and buses is a "last resort", Executive Director Rich Sarles said.
NJ Transit plans to hold the line on fares and is moving ahead with a nearly $10 billion capital improvement program. Most of that money would be spent building a train tunnel to Manhattan.
The 17 percent decrease in annual state aid would only affect the operations budget, Sarles said.
NJ Transit is cutting 140 administrative jobs through attrition and is consolidating office space in a bid to cut costs.