Stripped of the sloganeering -- "Turn Trenton upside down . . ." "the Jersey comeback . . ." "the new normal . . . " -- the brutally bleak reality is that the state’s fiscal condition is the worst it’s been in decades.
In a scene reminiscent of the investment broker staring in disbelief at the stock ticker in October 1929, the Christie Administration confronts the following:
A shortfall of $807 million in the current budget that must be bridged in less than two months.
The fifth downgrade of the state’s credit-worthiness by rating agencies since 2010.
A Transportation Trust Fund with no money left.
The need for $620 million to continue the state’s capital construction transportation program in 2016.
An underfunding of the statutorily mandated aid to education formula by $1 billion, leading to property tax increases or cutbacks in personnel and programs at the local level.
Unemployment stubbornly lodged at over seven percent.
A job creation rate that has recovered little more than half of those lost five years ago.
A scheduled payment of $2.2 billion into the state’s public employee pension fund.
A home foreclosure level now the highest in the nation.
Not surprisingly, accusations are flying thick and fast over who bears the responsibility for the sorry state of fiscal affairs, but a good deal of the blame must fall on Gov. Chris Christie who, as a candidate in 2009, pledged that “change is on the way,” an implicit promise that the old ways of tax and spend would end and be replaced by prudent policies to restore sound financial footing.
It’s been the rating agencies, entities with no political axe to grind, that have consistently identified the underlying reason for the state’s ills -- wildly optimistic predictions of anticipated revenues year after year, despite repeated warning signs that the economy remained so fragile the estimates would not be realized.
Those same agencies agreed also to the continuing use of one-time budget maneuverings -- fund transfers, postponing scheduled spending from one fiscal year into the next, a reliance on borrowing -- all served to undermine long-term stability and erode confidence in the state’s credit standing.
It is indisputable that the administration’s revenue projections have fallen considerably short year after year, requiring midcourse corrections to maintain a balanced budget.
Whether the estimates reflected wishful thinking or were based on a political decision to do whatever it took to get through the year and avoid tax or fee increases is up for argument.
David Rosen, budget director for the Office of Legislative Services, has for each of the past four years, warned that the administration’s revenue estimates were too generous and submitted his own figures which, in the end, proved more accurate.
Rosen was publicly castigated by the governor who accused him of partisanship and lacking the intellectual heft to be taken seriously. Rosen can take solace in the knowledge his projections turned out much closer to reality than the administration’s.
With its optimistic estimates, the administration constructed annual budgets that, in reality, contained structural deficits which it then addressed at the end of the fiscal year by rolling them over into the coming year, virtually guaranteeing an annual crisis to be solved by last-minute manipulations.
The Legislature shares some of the blame as well, for accepting the administration's projections despite Rosen’s warnings they wouldn’t materialize. It could have scaled back the estimates, crafted a budget to comport with the more conservative numbers, and sent the budget to the governor’s desk.
While the exclusive authority to certify revenue estimates rests with the governor, it would have been politically difficult for him to reject the lower projections in favor of his more optimistic outlook and seek approval for the spending increases it would permit.
With less than 60 days remaining in the fiscal year and with 90 percent of the current budget appropriations already spent, Christie has few options to fill the $800 million gap.
Widespread speculation has it that the governor will settle on a reduction or a delay in meeting the $1.6 billion obligation due the pension fund. It is the largest single pot of money remaining and, despite the potential for a major political uproar in the Legislature, it appears Christie has little choice but to move toward skipping a part of the payment or putting it off into the next fiscal year.
It’s highly unlikely that cuts in those few areas in which the money hasn’t already been spent will be sufficient to cover the $800 million shortfall, pushing the Administration closer to the pension solution.
Equally disturbing is the certainty that the budget difficulties -- most prominently devising a method to replenish the Transportation Trust Fund -- will continue into next year and the year after. Christie has given no indication his unyielding opposition to a tax increase of any sort and for whatever purpose has softened, even though a pay-as-you-go program for capital construction doesn’t appear possible or probable.
There is also the matter of increased payments into the pension fund, as well as the pressure to comply fully with the state’s aid to education formula.
There is no question that the administration’s wide-of-the-mark revenue estimates played a major role in creating the current crisis, as the credit rating agencies contend.
When the state could afford Budweiser, Christie budgeted for Dom Perignon ’55, a menu substitution the Legislature couldn’t resist, either.
It’s time for both to retreat from the taste.