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Analysis: Will Governor Christie's House of Cards Collapse?

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Looking at Gov. Chris Christie's schedule in the days leading up to last week’s budget battle, you would think he didn't have a care in the world as he continues to gear up for a 2016 presidential bid:

  • "Dad Dancing" with Jimmy Fallon, showing off the results of his "less is more" lap-band diet

  • Blaming Obama for Iraq in front of the Faith and Freedom Coalition in Washington

  • Raising money for the Republican candidate for governor in New Hampshire, the first primary state

  • Telling former Romney donors in Utah he isn’t “worried” about Bridgegate

  • Playing nine innings of "celebrity softball" in Yankee Stadium with Boomer and Carton so they can talk about it on WFAN for days.

Yet, as much as Christie continues to trade on his larger-than-life personality and fund-raising prowess to keep his presidential hopes alive, a series of expanding federal and state investigations, a budget and pension system in never-ending crisis, and a mired economy that belies his New Jersey turnaround narrative and threatens to undermine Christie's best-laid plans.

Governor YouTube

Christie’s meteoric rise to Republican presidential frontrunner status was built first on his YouTube celebrity status as a brash, tough-talking politician who put union members in their place. Then, on legislation to fix New Jersey’s pension system he teamed up with Democrats to pass, and finally on his Giuliani-style public leadership during superstorm Sandy -- a performance that elevated him from mere political celebrity to People magazine status.

From there, the roadmap to the White House was clear -- an overwhelming reelection as governor over underfunded Democrat Barbara Buono in a race nobody else volunteered for, a triumphant year raising money for the GOP and courting future presidential donors and endorsements as head of the Republican Governors Association in 2014, and an all-out presidential campaign starting the year after that.

But the seeds of Christie’s potential destruction were planted in the political calculation that accompanied the governor’s rise, and are now coming back to haunt him in the shape of revenue shortfalls, pension liabilities, unemployment statistics, and credit downgrades that he should find difficult to shake. Now, there are leaks coming out of criminal investigations whose impact the former U.S. Attorney knows all too well.

The ARC Issue

For Christie personally, the most potentially dangerous investigation flows directly out of one of the most important political and policy decisions he made in his first year as governor -- his October 2010 decision to cancel the Access to the Region’s Core (ARC) rail passenger tunnel in order to divert $3.3 billion in Port Authority and New Jersey Turnpike funds dedicated to the project to fund the Transportation Trust Fund without a gas tax increase.

For Christie, who had campaigned on a promise of no new taxes, avoiding an increase in New Jersey’s gas tax -- even if it is the third-lowest in the nation -- would have been a priority even if he was just looking ahead to reelection as governor. But Christie was already an emerging political star being mentioned as a potential presidential candidate in a party where approving any tax increase would be tantamount to political suicide.

Christie’s decision to cancel an $8.7 billion tunnel that was the largest public works project in the nation -- despite the Obama administration’s efforts to renegotiate potential cost overruns -- enhanced Christie’s GOP political bona fides, and inspired Republican governors elected the next month to follow suit by cancelling major federal-state rail projects in Ohio, Wisconsin and Florida.

While Assemblyman John Wisniewski (D-Middlesex), co-chair of the Legislature’s Select Committee on Investigation, has subpoenaed documents on the ARC Tunnel cancellation, it is Christie’s insistence on using Port Authority money to pay for the reconstruction of the Pulaski Skyway – which does not fall within the Port Authority region -- that is the focus of investigations by both the U.S. Attorney’s Office in the Southern District of Manhattan and the U.S. Securities and Exchange Commission.

And unlike Bridgegate -- which Christie blames on out-of-control subordinates he put in positions of power in the governor’s office and the Port Authority -- the decision to use Port Authority funds for the Pulaski Skyway falls directly on Christie.

Despite warnings from Port Authority lawyers that bond covenants barred Port Authority funds from being used to rebuild bridges and access roads leading into the Holland Tunnel, Christie bullheadedly went ahead and publicly announced in January 2011 that $1 billion in Port Authority money originally earmarked for the ARC Tunnel would be used to rebuild the Pulaski Skyway, according to memos obtained by The Record. Christie did not bother to consult with Port Authority officials before making his announcement.

Tunnel Vision

It took two months of heated negotiations between Christie’s top staffers led by Deputy Executive Director Bill Baroni -- whose resignation Christie later demanded because of his role in the Bridgegate scandal -- before Port Authority officials finally caved in and agreed on March 25 to grant approval to the project as an alleged approach road to the Lincoln Tunnel. This was done even though few drivers would ever take the Pulaski Skyway, which feeds into the Holland Tunnel, to get to the Lincoln eight miles to the north.

Christie, who has held few press conferences since the Bridgegate scandal broke, last discussed the Pulaski Skyway decision at an April news conference, in which he expressed confidence that the use of Port Authority money was justified. He dismissed criticism of the deal, saying “dozens and dozens of lawyers from both sides of the river” had signed off on the agreement.

But, as The New York Times reported last week, the Port Authority told the Securities and Exchange Commission that the agency never sought an opinion from outside bond counsel or outside legal advice on whether the thinly disguised effort to skirt its own rules was legal.

And if it were illegal, Christie has no one else to blame for his administration’s hard push to get around the Port Authority’s initial determination that the use of toll money to pay for the Pulaski Skyway reconstruction would violate bond covenants. If indictments are issued, Christie will have a hard time explaining to potential donors or to voters in Iowa and New Hampshire that it was just an administrative mixup that shouldn’t disqualify him from the presidency.

The Times story was the second in three days to go viral with the suggestion that federal enforcement authorities were targeting Christie. The first, an Esquire article coauthored by Lisa Brennan, who used to cover Christie’s U.S. Attorney’s Office and has good sources in the law enforcement community, ran Saturday.

While Christie repeatedly assures big-money Republican donors that he will not be personally implicated in Bridgegate by U.S. Attorney for New Jersey Paul Fishman’s grand jury investigations, headlines like Esquire’s “Exclusive: Prosecutor Is Closing In On Gov. Christie” and The New York Times’ “2nd Bridge Inquiry Said To Be Linked to Christie” create tremors among even the governor’s staunchest deep-pocket supporters.

Setting a Low Bar

Christie has set a low bar for his culpability in Bridgegate, insisting that he had no prior or contemporaneous knowledge of the four-day closures of entry lanes to the George Washington Bridge that snarled traffic in Fort Lee in apparent retaliation against Democratic Mayor Mark Sokolich for refusing to endorse Christie for reelection. However, it was Christie campaign manager Bill Stepien, who was perceived to speak for Christie on political matters, who set up the operation in the governors office that targeted Democratic mayors, African-American and Hispanic leaders, union presidents and others for reelection endorsements that would fit into Christie’s presidential campaign narrative as the candidate who could win in November 2016 by expanding the Republican electorate.

It was Stepien’s protégé, Bridget Kelly, the deputy chief of staff who was part of Christie’s inner circle and traveled frequently with him to events, who sent out the fateful “time for some traffic problems in Fort Lee” email . Baroni and David Wildstein, Christie’s political eyes and ears at the Port Authority who directly ordered the lane closures, carried out a clandestine operation on Christie’s behalf two years earlier to disguise the governor’s role in a controversial Port Authority toll hike that is still under investigation by the Wisniewski committee and is the subject of an ongoing civil lawsuit.

Wildstein, who is trying to negotiate an immunity deal with the U.S. Attorney, has said he told Christie of the lane closures at a World Trade Center memorial ceremony on September 11. Christie said he doesn’t remember the conversation.

And it is David Samson, Christie’s trusted 2009 campaign counsel whom he named as Port Authority chairman, who is at the heart of a slew of conflict-of-interest investigations alleging that he used his position to advance the interests of his law firm. Fishman’s office is investigating Hoboken Mayor Dawn Zimmer’s allegation that Lt. Gov. Kim Guadagno threatened on behalf of Christie to withhold Sandy aid from her city unless she supported a controversial Rockefeller Brothers high-rise development represented by Samson’s firm.

Governor Victim?

Whether the indictments of Samson, Baroni, Wildstein, and Kelly would cripple Christie’s presidential bid depends on if the governor can convince potential donors and GOP voters that he was a victim whose trusted aides lied to him and that he acted quickly to get to the bottom of the Bridgegate scandal by hiring an outside law firm to conduct an investigation in January after the incriminating Kelly e-mail surfaced on January 8.

What Christie cannot survive, however, is a finding that he knowingly participated in a coverup of the Bridgegate scandal for political advantage, first to get through his November reelection and then in an effort to get through the swearing in of a new Legislature on January 14. On that date, Wisniewski’s Assembly Transportation Committee’s subpoena powers would expire, and it was believed that Christie had a tacit understanding with incoming Democratic leaders that those subpoena powers would not be renewed, allowing the Bridgegate scandal to quietly die.

Instead, Bridgegate exploded into a national news story, and both the internal inquiry conducted for Christie by Randy Mastro and his Gibbon Dunn & Crutcher law firm and the testimony of Christie administration officials under oath before the Legislature’s Select Committee on Investigation have made it clear that Christie knew or suspected more than he admitted in November and December press conferences.

Christie’s chief counsel at the time, Charlie McKenna, who had responsibility for Port Authority issues in the governor’s office, has already testified before Fishman’s investigators, and is considered the key to determining what Christie knew and when he knew it. McKenna is on the Select Committee on Investigation’s list of top target witnesses when the panel resumes its hearings this summer, Wisniewksi and Senate Majority Leader Loretta Weinberg (D-Bergen), the committee’s cochair, both said.

The Comeback That Wasn't

Even if Christie’s presidential hopes emerge battered, but breathing, from what are expected to be at least a year of investigations and hearings, the economic and fiscal turnaround that Christie trumpeted as the “New Jersey Comeback” in January 2012 when he was at the top of the list for selection as the GOP vice-presidential nominee, has evaporated -- and with it, much of the record Christie planned to run on.

Once again, Christie’s political ambitions collided with prudent public policy in a way that ultimately undermined his presidential hopes.

Christie’s first two budgets were a model of fiscal conservatism in their revenue projections, but in January 2012 Christie began a three-year cycle of overestimated revenues leading to mid-year budget shortfalls filled by raids on dedicated funds and other “one-shot” fiscal gimmicks that contributed to the decision of all three bond agencies to cut New Jersey’s credit rating to a single-A tier only shared by Illinois and California.

The reason for the January 2012 revenue overestimate was clear: While most governors would have squirreled money away for a big tax cut in their 2013 gubernatorial reelection year, Christie’s sights were already on Washington. Christie wanted to propose an across-the-board 10 percent income tax cut in time for the Republican National Convention that summer to go along with the bipartisan agreement he had reached with Senate President Stephen Sweeney (D-Gloucester) to fix the state’s pension system by building up to full actuarially required funding of the state’s pension system over a seven-year period.

When Christie’s income tax cut was exposed as a boon for the state’s millionaires that would do little for most New Jerseyans, Christie endorsed Sweeney’s alternative plan for a property tax deduction up to $1,000 on the state income tax. For Christie that spring, any tax cut would do.

Christie’s original income tax cut would have cost the state $800 million in lost revenue in this year’s Fiscal 2014 budget and $1.1 billion more in the upcoming FY15 budge -- which would have been catastrophic when added onto the combined $2.7 billion shortfall in the FY14-FY15 budgets that developed in April.

That shortfall led Christie to cut $900 milion in promised pension payments for FY14 and $1.5 billion more for FY15 -- essentially abandoning the third and fourth years of the scheduled buildup to restoration of required pension funding that was his biggest accomplishment.

The Millionaire's Tax

It is to fund the restoration of the actuarially required pension payment of $2.25 billion in FY15 that led Sweeney and other Democratic legislative leaders to propose an increase in the millionaire’s tax to 10.75 percent for three years, a one-year hike in the corporate business tax to 10.35 percent, and a suspension of $175 million in corporate tax incentives for a year. Christie has promised to veto the Democratic tax increases -- which would be fatal for a Republican presidential candidate.

That would leave pension funding at $681 million in the FY15 budget, driving up the state’s unfunded pension liability to over $40 billion, and making it virtually inconceivable that he could find the $1.8 billion in revenue that his treasurer, Andrew Sidamon-Eristoff, said he plans to find to make a $2.5 billion pension payment in FY16.

A Heavy Lift

Christie has promised a plan to cut not only New Jersey’s pension deficit, but also its $51-billion-and-growing unfunded liability in retiree health benefits, but getting the Democratic Legislature to take away the free healthcare public employees receive after 25 years of service would be just as heavy a political lift as cutting pension benefits.

Christie also needs to come up with a new five-year, $8 billion plan by FY16 to refurbish the Transportation Trust Fund, which is running out of money a year earlier than expected because Christie diverted the New Jersey Turnpike money from the cancelled ARC Tunnel to plug holes in his operating budget instead of paying for highway, bridge, and mass-transit construction and went on a borrowing binge that used up almost all of the TTF’s set capacity.

Without $3.3 billion diverted from the Port Authority and the New Jersey Turnpike, it is hard to see where Christie can get the pay-as-you-go funding he needs without raising the gas tax -- which he is against and could be potentially lethal in the Republican presidential primaries.

So, even though New Jersey ranks near the bottom in economic and employment growth, Senate Budget Committee Chairman Paul Sarlo (D-Bergen) is not alone among political observers in believing that this is Christie’s last budget, and that he will leave to run for the presidency before the Transportation Trust Fund needs to be renewed and before continued sluggish revenue growth dooms any hope of meeting the pension funding schedule he signed into law in 2010.

Christie even has a readymade excuse: He cannot raise money from Wall Street firms who do business with the state while continuing to serve as governor -- which was one of the reasons that Republican presidential nominee Mitt Romney did not choose him for vicepresident.

It’s not much of an economic and fiscal record to run on, as Sarlo noted a few weeks ago. But even that is dependent on Christie surviving the various investigations he faces.

For the runaway favorite for the Republican presidential nomination coming off his landslide reelection victory over Buono less than eight months ago, it has been a steep fall, although his Q factor as must-watch TV has not dropped at all, as Jimmy Fallon can attest. Christie’s “Dad Dancing” was an instant YouTube hit. Whether Christie’s outsized personality translates into the 10s of millions of dollars and votes he needs to mount a serious presidential run once the investigations have run their course remains to be seen.

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