TRENTON — New Jersey Gov. Chris Christie Tuesday released a $29.4 billion spending proposal for fiscal 2012 that includes property-tax relief — if the Legislature passes health-care reform legislation.
Folded into the Republican governor's budget plan is $323 million of anticipated savings from his push to reduce rising state health-care costs by asking workers to contribute more for their health-care insurance, among other changes. Those savings could then finance rebates to homeowners on a portion of their property taxes. New Jersey has some of the highest property taxes in the nation.
Lawmakers balanced the current fiscal 2011 budget, in part, by suspending property-tax relief for non-seniors. Christie would like to once again extend property-tax rebates, but on the condition that his initiative to lower health-care costs becomes law.
"The choice is straight forward: without real health benefit reform, we will not be able to provide New Jerseyans with a double property-tax rebate," Christie said in his budget address before a special joint session of the Legislature. "By passing health-benefit reform, we will be able to provide the larger property tax rebate."
Christie has another carrot he's holding before the Legislature—a $506 million payment to the state's pension fund that's due in fiscal 2012. The governor said he would make that payment before July 1, the start of fiscal 2012, as soon as the Legislature approves his pension-reform measures.
The state, by law, must incorporate the $506 million allocation in its fiscal 2012 budget. Christie proposes making the payment early to entice lawmakers to pass his retirement changes now.
The state in years past has skipped payments to its pension fund to help fill structural deficits. Last year the state passed legislation that requires annual payments to the fund, with those allocations increasing gradually each year.
Democrats, who control both the Senate and the Assembly, have said they support changes to the state's pension system to lower long-term costs, such as increasing the retirement age and boosting employees' contributions to the system, along with other reforms. In addition, Senate President Stephen Sweeney earlier this month proposed his own health-care reform legislation to cut long-term costs.
Following Christie's budget address, Sweeney and Assembly Speaker Sheila Oliver said the fiscal 2012 budget must include a pension-fund payment of at least $506 million regardless of whether the state enacts changes to its retirement system. They believe pairing property-tax rebates with health-care reform legislation plays one group of residents against another.
"We're here willing to work. Ultimatums don't work with people," Sweeney told reporters during a press conference following the governor's speech. "We are willing and able to work with him….threats don't work."
New Jersey's unfunded pension liability is $37.1 million. Standard & Poor's earlier this month drop the state's credit rating by one notch to AA-minus from AA due to the pension obligation and the state's high debt levels. Moody's Investors Service rates the state Aa2 with a negative outlook. Fitch Ratings assigns its AA rating to the credit. The outlook is stable.
The $29.4 billion budget proposal includes $2.1 billion, about 7% of the operating budget, for debt-service costs on New Jersey's $32.84 billion of outstanding general obligation and appropriation-backed bonds. Officials plan to restructure about $120 million of debt to help lower debt-service costs in fiscal 2012 by moving those maturities out to future years, according to state Treasurer Andrew Sidamon-Eristoff.
In fiscal 2011, the state restructured $410 million of bonds to ease debt-service payments.
In addition, Christie's budget proposal includes $500 million of one-time measures to help balance the budget. That's down from more than $1.5 billion of non-recurring resources the state used in the fiscal 2011 budget.
"We think this is a very significant barometer of fiscal stewardship that we believe will be favorably received in the financial community as well," Sidamon-Eristoff told reporters during a budget briefing on the spending proposal.
Christie's budget plan holds aid to municipalities at fiscal 2011 levels and increases allocations to school districts by $250 million. To reduce state spending in the current budget, the governor cut support to school-districts and municipalities by $820 million and $446 million, respectively.
The governor is also seeking in fiscal 2012 $200 million of tax breaks for businesses, many of which Democrats already passed in their own tax-initiative bills. Christie earlier this month vetoed those tax breaks, as he believes lower taxes must be implemented within a balanced budget.
Overall, the administration aims to cut taxes for corporations during the next five years, at a cost of nearly $2.5 billion. Officials anticipate the tax breaks will help develop business growth throughout the state and increase jobs.
Christie's budget proposal reduces spending over the current year by 2.6%, or $778 million, assuming that the state makes the $506 million pension-fund payment in fiscal 2011. Officials anticipate the state will collect $29.3 billion of revenue in fiscal 2012, $1.1 billion more than the current year's budget projections, an increase of 3.9%.
To help offset the end of enhanced federal Medicaid funding, the budget calls for roughly $550 million of savings in Medicaid. Some of those anticipated savings require federal approval.
The governor and his staff described the budget process as "the new normal," in which the state moves towards sustainable spending by assuming a baseline of zero when crafting a budget.
"It is not a budget that funds each and every program at the same level as last year," Christie said during his address. "Instead, we've done something novel. We've actually identified key priorities and put together a budget that funds them."
Assemblyman Louis Greenwald, D-Camden, chair of the Budget Committee, rejected Christie's claim that the administration is ushering in a new budgeting process.
"We've been doing it for years," Greenwald said after the budget address. "You always start from zero. It's money in and then revenues out to fund programs. So it's not anything new. It's a nice sound bite for him to roll out, but it's more, I think, slapping himself on the back and giving himself credit for things that have been happening. Budgets have been trending downward for four years."
Conversely, Christie chief of staff Richard Bagger stressed that starting from scratch helped the administration face a projected $11 billion deficit in the fiscal 2012 budget.
"Once you start with the premise that the exercise of calculating the cost of funding hands off the wheel spending and cutting from there -- once you part from that method of approaching budgets -- those deficits are irrevocable to the process of building a budget."
Christie spoke of the fiscal temperament in other states, such as Wisconsin and California, where both GOP and Democratic governors are calling for less spending, labor reforms, and even changes to collective bargaining. The governor said other state leaders are now following his example of limited spending. Christie last year closed a more than $10 billion deficit in the current-year's budget without raising state taxes and by reducing spending.
"As I promised you last year, if we did the hard things, New Jersey would be a national leader in fiscal discipline," Christie said. "This year, look at how other states are following New Jersey."