New Jersey government is in shutdown mode for the first time in 11 years after Gov. Chris Christie and state lawmakers failed to reach agreements on a new budget before the close of the 2017 fiscal year Friday night.
Christie called for a special session of the New Jersey legislature at 10 a.m. Monday to try to end the stalemate, which stems from the Republican governor tying his support on Democratic demands for increased educational spending to approving two separate pieces or legislation. One bill would dedicate New Jersey Lottery revenue toward the state’s underfunded pension system, while the other earmarks $300 million of surplus funds from nonprofit public insurer Horizon Blue Cross Blue Shield toward treatment programs for opioid addiction.
Assembly Speaker Vincent Prieto, D-Secaucus, who supports the pension bill, remained steadfast in opposition to the Horizon legislation over the weekend. He said at a press conference Sunday he is open to compromise and taking up the bill after a budget is passed.
“I will not be bullied into doing something that is not good for the residents of New Jersey,” Prieto said in a press conference Sunday. "It is unconscionable that we are shut down."
"The attempt to extort Horizon's 3.8 million ratepayers is not part of the state budget, and as I've said previously, I will not consider it as part of the budget process,” said Prieto in a statement. "I am also ready to consider reasonable alternatives that protect ratepayers, but others must come to the table ready to be equally reasonable.”
The State Senate already approved both the Horizion and pension bills Thursday. Christie has argued that the lottery conversion legislation will increase the pension fund’s value by $13.5 billion and immediately raise the funded ratio from 45% to 59%. New Jersey has the worst state pension-funding ratio in the U.S., according to a new Pew Charitable Trusts report released in April.
“I’m open to signing their budget with the Horizon bill, or I’m open to another proposal they’d like to make but that proposal has to be a bona fide one,” Christie said during a press conference Sunday. “I’m not the person who has drawn a line the sand here.”
Underfunded pensions have weighed heavily on 11 bond rating downgrades under Christie’s watch since he took office in 2010 to the lowest level in the U.S. with the exception of Illinois. New Jersey general obligation debt is rated A3 by Moody’s Investors Service, A-minus by S&P Global Ratings and A by Fitch Ratings and Kroll Bond Rating Agency.
A prolonged budget impasse could impact debt service on some state appropriation bonds. S&P Global Ratings analyst Sussan Corson noted in a June 22 report the state’s earliest debt service due date that would need appropriation from the 2018 budget is Aug. 15 for a $54.6 million interest payment on state pension bonds. The last state shutdown of nonessential government services in 2006 took eight days to resolve.