While Gov. Chris Christie trumpeted a New Jersey comeback in his budget message, his proposed $32.1 billion spending plan for fiscal 2013 hinges on revenue projections that still must materialize.

“The governor is trying to build back education, higher education, especially, and pay off some of the pension obligations — a good chunk of it. The big question is whether the revenues will be realized,” Michael Riccards, executive director of the Hall Institute for Public Policy, a Trenton-based think tank, said Wednesday.

Christie introduced the budget Tuesday in a 40-minute speech to the Legislature, calling for a small increase in school aid, a 5.5% hike for direct aid to colleges and universities, and set-asides to pay for the first half-year of his proposed 10% income tax cut.

The budget exceeds last year’s enacted plan by $2.4 billion, though the governor pointed out that it remains smaller than the one he inherited when he took office in 2010. It would include a $1.1 billion pension payment, the highest ever for the state.

“In general, the outlook for the state’s economy is comparable to forecasts of national trends,” Christie said. “This is in contrast to the last few decades, when the state’s performance persistently trailed that of the nation.”

“Significant and ongoing tax reform and improved governance will continue to boost New Jersey’s growth,” he said.

Standard & Poor's called the proposed budget structurally imbalanced and based on optimistic economic projections.

Although it more than doubles New Jersey's contribution to its pension system, it continues  to defer full funding of the actuarial required contribution, or ARC. Standard & Poor's said education-related changes, such as the proposed restructuring of the the University of Medicine and Dentistry of New Jersey, could affect the credit quality of some colleges, based on revenue allocation.

Democrats, who control both branches of the Legislature and must approve the tax cut proposal, say the 10% income tax cut over three years advocated by the Republican Christie favors wealthy New Jerseyans. They favor property tax cuts instead.

“The Democrats want to see the increase in the tax cut skewed toward the working class, but would Democrats oppose a tax cut in this environment? I don’t think so,” Riccards said.

Based on estimates from state Treasurer Andrew Sidamon-Eristoff’s Office of Revenue and Economic Analysis, Christie expects fiscal 2013 revenues to be up $2.2 billion, or 7.3%, from the previous fiscal year.

New Jersey faces several challenges, notably in unfunded pensions.

Last year, all three major rating agencies downgraded the state’s general obligation bonds, citing the pension problem, in part.

Janney Capital Markets on Wednesday estimated New Jersey’s aggregate pension funding level at 62% as of June 30, 2011, based on actuarial numbers.

That figure is well below the 80% level that the Pew Center on the States considers adequate.

Moody’s Investors Service now rates the state’s GO bonds Aa3. Fitch Ratings and Standard & Poor’s each assign an equivalent AA-minus.

“New Jersey’s debt position remains high, and the state’s long-term pension and employee benefits obligations are very significant,” Fitch said in its August downgrade report.

Christie Tuesday cited bipartisan efforts at budget control, including 2% caps on property taxes and interest arbitration awards; pension and health benefit changes intended to save more than $120 million over 30 years; $2.35 billion in targeted business tax cuts, and $855 million in increased school funding.

New Jersey’s fiscal year starts July 1 and its budget must be signed by then. The Senate budget and appropriations and the Assembly budget committees will first review the budget.

Sen. Ronald Rice, D-Newark, urged Christie to be flexible.

“While every budget process requires a little bit of give and take, we’ve seen under this governor that there’s sometimes little room for compromise,” Rice said. “I would hope that, during this budget season, our governor listens a little more to the co-equal public servants in the state Legislature.”

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