Assembly Democrats question Christie's budget solution

New Jersey Treasurer Andrew P. Sidamon-Eristoff answers a question from the Assembly Budget Committee.
New Jersey Treasurer Andrew P. Sidamon-Eristoff answers a question from the Assembly Budget Committee. (AP)
Posted: May 23, 2014

TRENTON - Assembly Democrats on Wednesday slammed Gov. Christie's move to cut New Jersey's pension payments to shore up a $1 billion revenue shortfall, while the state treasurer defended the plan and repeated calls for further changes to the pension and health-benefits systems.

Treasurer Andrew P. Sidamon-Eristoff testified before the Budget Committee a day after the Republican governor issued an executive order to reduce the pension payment from $1.58 billion to $696 million for the fiscal year ending June 30.

Sidamon-Eristoff said the administration also had identified $118 million in underspending and savings in other departments and agencies to close the shortfall, which he has attributed to lower-than-expected income-tax receipts in April.

The administration has said it missed revenue targets because it underestimated the fallout from the 2012 "fiscal cliff," when federal income-tax cuts on the wealthy expired. Financial transactions made as a result caused income-tax payments to jump last year, but left 2014 payments trickier to project.

For fiscal 2015, which begins July 1, Christie proposed Tuesday that the state make a $681 million payment to the pension system, down from the $2.25 billion expected. Total revenue for 2015 is projected at $32.7 billion, almost $2 billion less than included in February's budget proposal.

Also in fiscal 2015, Christie plans to delay $400 million in property-tax rebates for nine months.

Overall, the administration reduced its revenue expectations by $2.75 billion for the two fiscal years.

Sidamon-Eristoff said he expected the unfunded pension liability to grow by $2.4 billion to more than $40 billion in fiscal 2016.

Democrats on Wednesday accused Christie of reneging on changes he and the Legislature agreed upon in his first term. The laws, which drew national attention, required public workers to contribute more toward their pensions and health plans.

Assembly Budget Chairman Gary Schaer (D., Passaic), reading aloud remarks the governor made when he signed the measure and later in a speech at the 2012 Republican National Convention, said Christie had misled the state's public workers into thinking he had solved the pension problem.

"At what point does the word of the state mean something?" Schaer said.

The state's public-sector unions have vowed to challenge the executive order in court.

Credit-ratings agencies have downgraded New Jersey's debt, citing revenue shortfalls, budget imbalances, growing pension costs, and other things. Schaer asked Sidamon-Eristoff whether he had considered whether the pension cuts could trigger another downgrade. Downgrades increase the cost of borrowing.

"We're always aware of the possibility," Sidamon-Eristoff said. "But our obligation is, first and foremost, our responsibilities under the constitution."

The state constitution requires the governor and Legislature to pass a balanced budget. Sidamon-Eristoff also noted that ratings agencies have highlighted New Jersey's unfunded liabilities with regard to pensions.

"Those currently, and for the foreseeable future, represent huge challenges in the state's budget," he said. "That is why the governor has repeatedly said we need to revisit pension and health-benefit reforms."

Christie said Tuesday that he would likely unveil his plan next month.

Sidamon-Eristoff said the alternative to slashing the pension payment would have been to cut spending for hospitals, higher education, and schools.

To address this year's shortfall, Democrats had floated the possibility of raising income taxes on New Jersey's highest earners with a so-called millionaire's tax. Assemblyman Declan O'Scanlon (R., Monmouth) said that such a tax hike would only increase the volatility in the state's revenue stream. He also said the state's budget woes lay not in Christie's proposed cuts, but rather in Democrats' opposition in 2011 to bigger pension changes.

"You can't blame the governor for digging us into a ditch when it was you yourself who dug the ditch," O'Scanlon said.

Earlier Wednesday, David Rosen, the Legislature's budget and finance officer, told the committee that he now projected a two-year revenue shortfall of about $2.7 billion - an estimate similar to Christie's.

The Office of Legislative Services, like the administration, underestimated the effects of the fiscal cliff, he said.

"We assumed that about half of the jump was a one-shot, with the rest attributable to a strong year in the stock market," Rosen said, referring to a one-time increase in income-tax receipts. "In retrospect, it is clear that our assumption was wrong."



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