Christie would borrow to plug 2013 budget hole and fund tax cut

Posted: May 24, 2012

TRENTON — The Christie administration backtracked Wednesday on its plan to borrow less in 2013 to pay for transportation infrastructure improvements.

It hopes to shift $260 million originally intended for transportation spending into the state’s general fund, which would help facilitate Gov. Christie’s top priority in the coming fiscal year: implementing a 10 percent income-tax cut.

The state would then borrow $260 million to replace that cash in the annual $1.6 billion transportation capital fund, a practice Christie previously criticized, State Treasurer Andrew P. Sidamon-Eristoff said Wednesday.

Sidamon-Eristoff said that cutting income taxes over the next three years was the “best long-term economic strategy” for the state.

Without the tax cut, New Jersey could lose more of its top earners, leading to volatile revenue swings.

“We tend to focus on very high-income taxpayers. I want them here so I can tax them,” Sidamon-Eristoff said at an Assembly Budget and Appropriations Committee hearing in Trenton on Wednesday afternoon. “We need more of them in New Jersey. So, give me more millionaires so that I can tax them, please.”

Assemblyman Gary S. Schaer (D., Passaic) said he had doubts about the state borrowing money to pay for an income-tax cut that would provide the greatest benefit to the wealthy.

“It’s the equivalent of going to your bank and borrowing money to deposit into your checking account that you must later repay with interest,” he said in a statement. “It doesn’t make financial sense, and it’s unfair to the taxpayers.”

The governor’s revised $31 billion proposed budget relies on revenue growth of 8.6 percent from now until June 30, 2013. Two Wall Street ratings agencies have cast doubt on that assumption because New Jersey is recovering from the recession at a slower rate than the national average. Its unemployment rate is 9.1 percent, higher than the national average of 8.1 percent. April tax collections and energy receipts came up short, leaving the state with a budget deficit of about $600 million in fiscal year 2012, which ends June 30.

David Rosen, budget analyst for the nonpartisan Office of Legislative Services, expects state revenues will grow at 7.6 percent from now until the close of fiscal 2013, a projection he called “a half-notch below aggressive” considering the sluggish recovery nationally and continued economic woes in Europe.

“To put it simply, revenues are rising too slowly to achieve the year-end targets,” Rosen testified before the budget committee on Wednesday morning. He predicted a revenue shortfall of up to $1.3 billion by next June. The administration anticipates the gap to be half that and offered its plans to solve the problem later on Wednesday.

As Assembly members grappled with the differing predictions, Christie amped up the acrimony by calling Rosen, who has served 28 years at the OLS, “the Dr. Kevorkian of the numbers,” apparently in an effort to cast Rosen as a man who is trying to kill New Jersey’s economic recovery like Jack Kevorkian helped terminally ill patients commit suicide.

Christie made his comments following a transportation conference in Trenton at which he urged transportation advocates to pressure New Jersey lawmakers to fund his five-year transportation capital plan — the same one he wants to borrow from to help pay for his tax cut, which would be rolled out over the next three years.

At the conference, Christie criticized Rosen’s economic forecasts and questioned how “anyone with a functioning brain” would believe him, in light of his previous forecasts that missed the mark. Christie suggested that Rosen was beholden to the Democratically controlled Legislature his agency is assigned to assist.

But during his testimony, Rosen noted that since 2000, OLS has had a median margin of error of 3.2 percent in estimating revenues compared with a median margin of error of 3.9 percent for the executive branch.

The OLS has drawn criticism from Democratic and Republican governors in the past, but Christie’s tone was particularly harsh and personal: A woman who answered the phone at the budget office gasped when she heard what Christie had said.

Rosen did not return a call for comment.

Assembly Majority Leader Lou Greenwald (D., Camden) called Christie “unhinged.”

“This is yet another example of the governor’s reprehensible use of name-calling whenever things don’t break his way,” Greenwald said in a statement.

Assemblywoman Bonnie Watson Coleman (D., Mercer) said during the afternoon budget hearing that Christie should apologize for his “ungentlemanly and un-gubernatorial remarks.” Instead, his press office released a YouTube video of his attack on Rosen and his forecast.

The state Treasury revised Christie’s original $32 billion proposed fiscal 2013 budget on Wednesday due to lower-than-expected state tax collections last month and energy revenues that came up short due to a warm winter and a drop in the price of natural gas.

Sidamon-Eristoff predicted a fiscal 2012 shortfall of just over $300 million and suggested using $200 million from the Clean Energy Fund and leftover money from various agencies to balance the budget. For fiscal 2013, he would dip into environmental funds again, taking a suggested $79 million from the Clean Energy Fund, Sidamon-Eristoff said.

Utility customers pay a percentage of their bill to the Clean Energy Fund, a pot of money meant to be used for incentives to businesses to invest in cleaner energy, such as wind or solar power. Sidamon-Eristoff said the administration would draw funds that have not been allocated for projects.

This wouldn’t be the first time Christie has dipped into the fund: Christie diverted $107 million from it this year for other uses, said Jeff Tittel, director of the New Jersey chapter of the Sierra Fund. The fund typically gathers about $260 million annually, he said.

“The governor is taking all of it and then some,” Tittel said. “This money is supposed to be dedicated to energy efficiency, weatherization, and renewable energy, which would create ... jobs that we have now lost due to this raid.”

Christie’s proposed budget relies on nearly $1 billion in one-time revenue sources, such as diverting $275 million in housing funds, said Gordon MacInnes, president of the nonprofit New Jersey Policy Perspective.

MacInnes criticized Christie for his claim that New Jersey is experiencing a “comeback” because of his policies.

“The day the governor took office, New Jersey had the 19th-highest unemployment in the national,” he said. “Today it’s got the fifth-highest unemployment rate in the nation and the third-lowest credit rating. That does not sound like a comeback to me.”

Contact Joelle Farrell at 856-779-3237 or jfarrell@phillynews.com, or follow on Twitter at @joellefarrell. Paul Nussbaum contributed to this article.

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