Policy: Budgets & Deficits

Chris Christie proposes largest budget in New Jersey history on costs

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Politics,Education,New Jersey,Chris Christie,Budgets and Deficits,Bloomberg News,Pensions

Gov. Chris Christie proposed the largest budget in New Jersey history, a $34.4 billion plan swollen by rising costs for health benefits, pensions and debt.

Spending would rise 3.5 percent from this fiscal year’s $33.3 billion as the state makes a $2.25 billion payment, the biggest ever, to its underfunded pension system. Ninety-four percent of budget growth is for pensions, health benefits and debt service, leaving little to add other services and programs, Christie told lawmakers Tuesday in Trenton.

The governor, a second-term Republican and potential presidential candidate, urged Democrats who control the legislature to approve more changes in the state’s pension and benefit system. A 2011 overhaul of benefits that Christie persuaded Democrats to support didn’t go far enough, the governor said, without saying what else needed to be done.

“Only 6 percent of new spending can be focused on the areas where we really want to dedicate our resources: education, tax relief, public safety, higher education, drug rehabilitation, health care,” he said. “We are in danger of having these costs overwhelm our budget, monopolize our resources and threaten our ability to continue to fund the priorities we care about most.”

Pension headache

Excluding pensions, health benefits and debt service, Christie’s budget proposal for the year that starts July 1 totals $25.5 billion, which is $2.2 billion smaller than in 2008, according to the governor’s office.

“Over the last five years, we have cut discretionary spending by $2.2 billion,” Christie said. “This has been an era of fiscal restraint.”

Christie, 51, forecast fiscal 2015 revenue will rise 5.8 percent from a revised $32.6 billion for 2014. Forecasts fell short this year partly because of less-than-expected gambling revenue, Treasurer Andrew Sidamon-Eristoff told reporters Tuesday.

The governor should focus on improving the economy to boost revenue, not cutting obligations, Democratic lawmakers said after his speech. Christie needs to create jobs as New Jersey trails neighbors in employment growth, Senate President Stephen Sweeney said.

“If we stay the course, the pension system is going to be fine,” Sweeney, a Democrat from West Deptford told reporters in Trenton. “We need to put people back to work and we need a plan to put people back to work. That will fix your revenue problems.”

School aid

Christie’s budget would provide a record $9 billion in public-school aid, an increase of $36.8 million from this year, and $2.3 billion for higher education, or $159 million more.

He expects to generate more than $200 million of new revenue from sales taxes on out-of-state Internet retailers doing business in New Jersey, and the closing of some corporate- tax loopholes. At the same time, the budget includes $600 million in business-tax cuts, the treasurer said.

New Jersey’s pension deficit reached $53.9 billion in 2010 after the state expanded benefits and skipped payments over a decade. The gap fell to $36.3 billion after Christie signed bills to boost employee pension and health-care contributions, raise the minimum retirement age for new workers and freeze cost-of-living adjustments. It rebounded to $47.2 billion as of July 1, 2012, as Christie made only partial contributions.

Christie signed a law in 2011 requiring the state to make one-seventh of its pension contribution in fiscal 2012 and then raise the payment each year until it reaches the full annual amount in 2018. The payment for this fiscal year, 2014, is $1.675 billion, or three-sevenths.

Teachers union

The $2.25 billion contribution proposed for 2015 is almost equal to the total payments made in the 10 years before Christie became governor, according to his office.

The governor, during his first term, targeted the unions">New Jersey Education Association and other public-employee unions because of what he called too-generous contracts negotiated by prior Democratic administrations.

Workers are already doing their part, NJEA President Wendell Steinhauer said in a statement.

Christie is “misleading New Jersey residents about the state of the pension system,” Steinhauer said. “As a result of deep, painful cuts absorbed by public employees and retirees in 2011, pension costs going forward have been curtailed, and the state is finally on the road to responsible, sustainable pension funding practices.”

The New Jersey chapter of Americans for Prosperity, a national group that advocates smaller government and lower taxes, panned Christie's proposal. The group said in a statement it “did not offer much in the way of free-market, pro-growth ideas.”

“While the governor is making a modest raise in spending this year, primarily to the pension system, it is an increase in spending nonetheless,” said Mike Proto, its spokesman.

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