The Next Budget Battle

Mark J. Magyar | June 30, 2011 | Budget
The Democrats got the budget they wanted -- all $30.6 billion of it. Now the Republicans get what they want: a Christie veto. Here's where it gets interesting

United for at least a day after almost two weeks of bitter infighting, the Democratic majorities in the Senate and Assembly yesterday approved a $30.6 billion budget.

“There are some calling this a ‘Democratic’ budget. I simply say it is a budget for New Jersey,” Senate Budget Committee Chairman Paul Sarlo (D-Bergen) insisted.

The victory celebration may be short-lived, with Gov. Chris Christie saying last night that he won’t sign the budget and the only question being what form of veto he will wield. He could veto the budget outright, do a conditional veto that would force the legislature to return today, or just veto individual line items that would still leave the budget intact.

There was virtually no question that Christie would also veto the Democrats’ accompanying millionaire’s tax, something even its sponsors appeared resigned to for much of yesterday’s floor debate.

An Election-Year Budget

Still, more than anything, it is an election-year budget for embattled Democrats, who will be defending their 24-16 control of the Senate and 47-33 edge in the Assembly in November. That task was made more difficult when 22 Democrats from South Jersey, Essex and Hudson counties — led by Senate President Stephen Sweeney (D-Gloucester) and Assembly Speaker Sheila Oliver (D-Essex) — joined with Republicans to pass a new law that will increase the pension and health benefits payments of public employees while taking away their right to bargain on healthcare issues for four years.

The budget and millionaire’s tax that each passed the Senate and Assembly yesterday on strict party lines will give Democrats the opportunity to campaign this fall on a platform claiming that they voted to provide full state aid for the first time to every school district and to restore a property tax freeze for senior citizens and Earned Income Tax Credits for the working poor. It also includes more money for police, women’s health clinics, family planning and a slew of other programs.

A Political Exercise

But despite the fervor of the debate on both sides, Democrats and Republicans alike knew that they were engaging in what was essentially a political exercise designed to force Republican legislators to oppose Christie’s veto of these popular programs.

Even before he made his veto vow last night, Christie has made it clear at every opportunity since he took office that he would veto any effort to reimpose higher income taxes on the wealthiest New Jerseyans. He did so last spring when he vetoed the renewal of former Democratic Governor Jon Corzine’s higher tax brackets for 63,000 New Jerseyans earning over $500,000, even though it would have provided increased property tax rebates for senior citizens.

Christie will do so again with the Democratic millionaire’s tax passed yesterday, that would raise the top tax rate from 8.97 percent to 10.75 percent on the state’s wealthiest residents, even though the money would go to provide full funding for the first time for hundreds of suburban and rural school districts and to exempt pension income up to $100,000 from the state income tax.

Last night’s emailed statement from his press secretary, Michael Drewniak, leaved little doubt that there will be at least some showdown today.

The Unconstitutional Angle

“The Democratic budget passed today by the Senate and the Assembly is unconstitutional in its present form based on hundreds of millions of dollars in spending that is unsupported by constitutionally certified revenue,” the statement read.

“There is a lot for the Governor to study and review in order to make a determination as to whether the budget can be fixed and brought into balance to fulfill the state’s constitutional obligation. At this time, the governor can’t be certain if the remedy is the line-item veto or whether he needs to consider sending it back to the legislature.”

Either way, Democrats do not have the two-thirds majority needed in either house to override whatever veto he uses, and no Republican votes can be expected from GOP caucuses that have displayed ironclad party discipline on every important vote since Christie took office.

Nor can Democrats do anything about Christie’s ability to determine the size of the final budget based on his constitutional power to certify revenues. Similarly, there’s nothing they can do about his possible line-item vetoes of their favorite spending items — without GOP support.

“This rhetoric about reaching across the aisle is great, but we have done nothing but play games,” Senator Ronald Rice (D-Essex) complained during the debate on the budget, echoing criticism he had made publicly in the caucus, while urging his colleagues to stand up to Christie and the Democratic bosses who support him. “New Jersey and Democrats need to wake up, because what we have done so far as Democrats is play into the hands of far right Republicans who want to privatize everything.”

Senator Anthony Bucco, (R-Morris), the ranking Republican on the Senate Budget Committee, and Senate Minority Leader Thomas Kean, (R-Union), led the charge against the Democratic budget in the upper house, focusing their attacks on overall spending and revenue questions, rather than on the merits of specific programs.

Bucco asserted that the Democratic budget would “increase state spending by 6 percent over last year when we’re coming out of a recession, and no family in New Jersey is increasing its spending by 6 percent.” He said it was “reckless and irresponsible” to consider any tax increase, and contended that the proposed budget included a “700 million to $900 million hole the governor would have to fill.”

No Basis In Fact

Kean agreed. “This budget promises lots of things that sound great to the people we represent — but it is paid for by hundreds of millions in savings and revenues with no basis in fact,” he warned.

He noted that the Democratic budget is built upon “$365 million in revenue that the Treasurer will not certify — we are required by law to use the Treasurer’s numbers — and $190 million in phantom savings that nobody can identify by line item. And worst of all, a $165 million dollar shortfall resulting from compromises made in the pension and benefits reform bill that the sponsor of this budget acknowledged two weeks ago, but made no attempt to reflect in this budget.”

Sarlo and Sweeney both argued that the $365 million in additional revenue was certified as safe to include by David Rosen, budget officer for the non-partisan Office of Legislative Services (OLS), whose annual forecasts have historically been more accurate than those of Democratic and Republican administrations alike, whose treasurers’ revenue estimates can be more conservative or aggressive depending on whether the governor wants to spend more or less.

Nevertheless, it is the governor and treasurer who certify the final revenue figures, and unless Christie and Sidamon-Eristoff have had a sudden change of heart, the governor will have to cut at least $365 million from the Democratic budget bill.

Christie has already said he will approve the $447 million in increased school aid for the 31 Abbott districts required by the Supreme Court.

For Christie, the core question is whether he wants to approve at least some of the $580 million in increased school aid to bring 215 other school districts — including scores of suburban districts in Republican counties — and the $87 million in additional school aid that would go to every district in the state.

Phantom Savings

If Christie and his treasurer believe that higher revenues are indeed likely, they could ignore some of the phantom savings and nonexistent healthcare savings identified by Kean, and assume that they can cover some additional school aid out of the higher surpluses that would be generated by the revenue surge the OLS expects. Sidamon-Eristoff acknowledged during legislative budget hearings that he was being conservative in his revenue estimates out of concern that a dip on Wall Street would send state income tax revenues plummeting or that economic growth could slow.

In any case, providing at least some increased school aid over what Christie proposed in his initial budget would be popular with Republican legislators running for reelection this fall, and the governor could decide to oblige them.

The Democratic budget gives Christie some easy choices and some difficult ones as he decides how to balance it.
The governor, who has made his anti-abortion positions clear, is expected to again veto the $7.5 million in family planning money that would draw down federal funds on a 9-to-1 basis. He may, however, be willing to consider a resolution that would temporarily delay the closing of the Vineland Developmental Center while a state commission reviews the state’s seven developmental centers and makes a final decision on which would be the most logical and cost-effective to close.

The Democratic budget also includes $50 million to rehire police laid off in up to 100 communities with relatively high crime rates and $61 million to provide full funding for the senior citizen property tax freeze program. The budget also includes funding to restore last year’s cut in the Earned Income Tax Credit that goes to 400,000 of New Jersey’s working poor.

One of the most contentious issues is the Democratic challenge to Christie’s Medicaid program overhaul, specifically the cuts in eligibility for new enrollments in the FamilyCare program and a proposal to lower income eligibility to just $5,000 for new Medicaid enrollees that Speaker Oliver has particularly criticized.