Christie proposes $34.4B budget, warns of looming pension costs

Gov. Christie attributed ballooning costs to predecessors who "paid little or nothing into the system," and implored the Democratic-led Legislature to help him solve the problem.
Gov. Christie attributed ballooning costs to predecessors who "paid little or nothing into the system," and implored the Democratic-led Legislature to help him solve the problem. (AKIRA SUWA / Staff Photographer)
Posted: February 27, 2014

TRENTON - Touting "an era of fiscal restraint" while warning that soaring pension costs would demand changes, Gov. Christie on Tuesday proposed a $34.4 billion budget for next year without pitching the income-tax cut he has long sought.

Instead, the Republican governor, who also did not propose new taxes, focused on a sobering fiscal forecast. The state's pension and debt costs are growing at an unsustainable rate, he said, and action is needed now.

"This problem will not go away by itself. We cannot wish it away," Christie said as he described a "looming crisis" threatening to strangle the state budget.

He did not specify any changes to the pension system. But he said the law he signed in 2011 that required public employees to pay more toward their pensions and the state to make escalating payments over a seven-year period "didn't go far enough."

As investigations continue into the George Washington Bridge controversy that erupted near the start of his second term, Christie sought Tuesday to turn attention to his fiscal record. He said he had cut discretionary spending, even as the state confronted costs beyond his control.

The budget he presented - the fifth of his tenure - is 4.4 percent larger than the one he signed last year. The vast majority of the growth - 94 percent - is due to pensions, health benefits, and debt, Christie said.

Attributing the ballooning costs to predecessors "who paid little or nothing into the system," Christie prevailed upon the Democratic-led Legislature to work with him to address the problem, though he did not say how.

"All of us are paying today for the sins of the past," Christie said. "Let's pledge to each other not to repeat those sins."

The speech did not draw a sharp rebuke Tuesday from top Democrats, who had vowed to fight any proposal that did not make a full payment into the pension system.

Christie said he would pay a record $2.25 billion into the system next year.

Democrats said after the speech that they appreciated Christie's "conciliatory" tone. But they also suggested that his alarming portrayal of the pension system was overblown, noting that the increase in the state's pension payment is to be phased in over time.

"We've done what we needed to do with the pension system. We need to stay the course," Senate President Stephen Sweeney (D., Gloucester) said at a news conference with other top legislators.

Assembly Majority Leader Louis Greenwald (D., Camden) agreed with Christie that "we cannot tax our way out of our problems."

But, he said, "how much are you going to move the needle" in asking public employees to contribute more toward their pensions "when it's not necessary and the pension is safe?"

"It sounds to me more like a gimmick to move us out of what the real crisis is, which is that we have failed to grow our economy" and failed to "address true property tax reform," Greenwald said.

Christie's proposal would increase school aid by $36.8 million, according to the state treasurer. Christie said the budget would add money for specific education initiatives, including $5 million for a program seeking proposals from school districts to increase student learning time. In his State of the State address last month, Christie called for lengthening the school day.

Christie also proposed an additional $5 million for preschool initiatives. The governor drew heat from former Democratic Gov. Jon S. Corzine in 2009 when he likened preschool to "babysitting."

Christie's budget also includes an additional $4.5 million to expand the mandatory drug court program.

"This is continuing our philosophy that every life is precious," he said.

While the budget includes some increases, other investments will not be possible without changes to the pension system, Christie said.

"If we do not get this tiger by the tail, none of it will happen," he said. He pointed to Detroit's bankruptcy, saying most of the city's $11 billion debt was attributable to retiree health benefits and pensions.

Christie said he was "proud to have made the decision to expand Medicaid and provide greater access to health care for New Jerseyans in need."

More than a dozen other Republican governors, saying they opposed the Affordable Care Act, rejected Medicaid expansion, which was originally mandated by the law but then made optional by the Supreme Court.

While Christie also says he thinks the law will fail, he said last year he accepted the provision because it offered federal funds that otherwise would have gone to other states.

On Tuesday, Christie said New Jersey would receive more than $100 million in additional federal funding and would spend $12 billion in federal and state dollars to cover 1.4 million people. He called on research institutions such as Rutgers University to work on innovations in health-care delivery.

Not addressed in Christie's speech was a revenue shortfall in the current budget estimated to exceed $400 million - a figure that doesn't include unrealized Internet gaming revenues.

It was not clear Tuesday how the shortfall would be closed in the current budget, which ends June 30. The state constitution requires budgets to be balanced. Treasurer Andrew Sidamon-Eristoff said in a news briefing that the state had lowered its revenue estimates for this year by $250 million, including a $126 million decrease in casino revenues.

He also said the shortfall forecast by the Office of Legislative Services didn't account for any reductions in state spending.

"There are going to be opportunities to realize savings," including in Medicaid spending, he said.

Christie's administration provided only the broad outlines of his budget Tuesday.

Republicans welcomed Christie's call for pension reform. "If there was a referendum to support the Christie reform agenda by trying to balance pensions and benefits, I guarantee you it would pass overwhelmingly," said Assembly Minority Leader Jon Bramnick (R., Union).

At least one Democrat noted that for all of Christie's talk of soaring pension and benefit costs, the governor did not propose a specific policy to address the issue.

"Today we did not see the same governor who delivered last year's budget address. There was a remarkable lack of specificity on a lot of the issues he talked about," said Assemblyman John S. Wisniewski (D., Middlesex), whose special legislative committee is investigating the bridge scandal that has dogged the governor's office.

"He's in a different mode," Wisniewski said. "He's not as bold as he had been in the past."

N.J. Budget at a Glance

Highlights of the budget that Gov. Christie proposed Tuesday for the fiscal year starting July 1:

Total Spending: $34.4 billion, up by $1.2 billion over the current year's adjusted budget. If it passes at this size, it would be the state's largest budget and the first since the recession to eclipse the fiscal 2008 spending total of $33.6 billion.

Projected Revenue Growth: Nearly 6 percent. The state expects income-tax revenue to grow by more than 8 percent. Because the state has a highly progressive system, taxing high earners at higher rates, income tax revenue in New Jersey can grow faster than the economy as a whole.

Taxes: Christie has not revived a proposal to cut taxes. He made a proposal to do so in 2012, but it was thwarted by lawmakers. He has frequently talked of reviving the idea.

Pension Contribution: The state would make a $2.25 billion contribution to the pension funds for public employees in the fourth year of a seven-year phase-in to meet the full obligation. Over the last two decades, the state has often skimped on or skipped payments.

Education: The state's funding for public education through high school - which makes up more than one-third of the budget - would increase by about 4 percent. Christie says every school district would receive increases - and not just the symbolic $1 increases that scores of districts got last year.

Longer School Hours: Of the education funding, $5 million would be used to pay for local school districts' efforts to lengthen school days or years. The money would be awarded through competitive grants.

Higher Education: Including aid to public colleges and universities, student financial assistance, and debt service for college-building projects, the state would put $2.3 billion toward higher education, an increase of 7 percent.

Hospitals: Hospitals would get $985 million, exactly the same amount in fiscal 2015 as they're getting in 2014. But there is one slight shift - the charity care program would be cut by $25 million, and University Hospital in Newark would have its aid increased by the same amount. - AP

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