Gov. Philip D. Murphy of New Jersey proposed a $58 billion budget on Tuesday that would keep spending roughly flat as the state braces for potentially drastic reductions in federal funding, including Medicaid.

State officials acknowledged that drafting the final budget of Mr. Murphy’s second term had proved challenging amid uncertainty in Washington, where Republicans are mulling deep cuts in spending on health care for low-income people to help pay for $4.5 trillion in tax cuts.

New Jersey estimates it could lose as much as $5.2 billion in Medicaid matching funds that help provide health coverage to roughly 700,000 residents.

“There are some draconian cuts that might be presented,” the state’s treasurer, Elizabeth Maher Muoio, said.

“That is the real game changer that we all have to be aware of,” she added.

New Jersey, she noted, is not the only state grappling with such uncertainty.

Last week, the bipartisan National Conference of State Legislatures warned that any dip in Medicaid funding could lead to devastating results, noting that roughly 79 million Americans depend on it for health care.