The governor could not control his anger: David Rosen, the budget officer for the non-partisan Office of Legislative Services, had just testified that he had a $383 million hole in his current budget and that his treasurer was overestimating next year’s revenue by $227 million. Thanks to Rosen, opposition legislators were rushing to issue press releases attacking his budget.
The furious governor? It wasn’t Chris Christie. No, it was the man he replaced, Democrat Jon Corzine.
The year was 2009, Corzine was running for reelection, and what was especially aggravating to the former Wall Street wizard was that Rosen was right. Two months later, Corzine’s treasurer revised his revenue projections for the following year downward by $839 million, only to have Rosen cut his revenue projections by $1.06 billion — leaving an even bigger gap..
Rosen’s pessimistic forecasts were seized upon as proof of Corzine’s mismanagement of the New Jersey economy and budget by his opponents — including the Christie campaign.
Ironically, Christie didn’t recall where that handy ammunition came from as he launched into a rant on the Atlantic City Boardwalk Tuesday.
“There are two things OLS has proven to be good at,” Christie told the cameras. “One is being wrong, and two is following whatever the agenda is of the majority in the legislature. Last year, when the legislature wanted to spend more, they said I said I didn’t have enough money. They turned out to be wrong about that. Now this year when I want to cut taxes, they say we don’t have enough money.”
“These guys – the partisan Office of Legislative Services — is merely a tool of the majority party in the legislature,” he said. “They shouldn’t be given any credibility. Mr. Rosen’s testimony is dead on arrival before he sits down in the chair today. And as far as I’m concerned, they’re background noise to the New Jersey Comeback.”
He was about to tell the Senate Budget Committee that in the opinion of the respected Office of Legislative Services – in which he had served since 1984 — Christie would end up with a $145 million hole in his current year budget and would come up $392 million short on his revenue projections for next year.
Yesterday, Republican members of the Assembly Budget Committee were almost apologetic in their questioning of Rosen, whose reputation for integrity is synonymous with that of the OLS Budget Office he heads. Assemblyman Declan O’Scanlon (R-Monmouth), the ranking Republican on the panel, went out of his way to publicly thank Rosen for his “professionalism.”
Rosen declined to comment on Christie’s attack, other than to say, in response to a question by Assembly Budget Committee Chairman Vincent Prieto (D-Hudson), that no legislator had ever asked him to change his revenue numbers in the more than two decades he had been preparing projections for budget committees controlled by both Democrats and Republicans.
The Office of Legislative Services provides research simultaneously to both the Democratic and Republican leadership. “We work for everybody, both parties, both houses, rogue members who aren’t part of the leadership, all of them,” Rosen said in a 2010 interview with NJ Spotlight. “So simultaneously you’re working with a legislator on some fiscal analysis, and may work with another who wants arguments to shoot it down.
It requires you to be very careful. You literally have to partition your brain. What it often means is that when negotiations go on, I may be one person who knows everyone’s position. ”
OLS has a reputation for playing it down the middle between the two parties; if OLS has any bias at all, it lies in its loyalty to the legislature as an equal branch of government, and its tendency in its legal opinions to assert legislative authority — as it did recently with its opinion that Christie’s planned merger of Rowan University and Rutgers University-Camden should go to the legislature for its approval. That ruling infuriated Christie, who has asked his own Attorney General’s Office for an opinion — presumably one that will be more in line with their boss’s.
Because Rosen and his fellow OLS budget experts work for both parties, they have no incentive to be aggressive or conservative in their revenue forecasts — which is not always the case with governors and state treasurers, especially in election years.
A NJ Spotlight review of more than two decades of OLS and Treasury Department figures showed that the widest differences in revenue projections usually occurred in the budgets proposed in gubernatorial election and reelection years. Invariably, OLS’s estimates were more conservative than those of the state treasurers, and while revenue forecasting is an inexact science, OLS’s forecasts generally proved much closer to the mark.
However, OLS and the New Jersey Legislature do not have the power to certify the final revenue numbers — and, therefore, the size of the annual state budget. The New Jersey Constitution gives that power exclusively to the governor, and governors running for reelection rarely pay attention to OLS or the protests of veteran legislators from both parties who have spent years serving on budget committees. Governors certify higher revenue numbers in their reelection years because it enables them to fund new programs or avoid painful budgets cuts that will harm their campaigns.
While Corzine projected in June 2009 that Fiscal Year 2010 revenues would come in at $28.802 billion, Rosen forecast that revenues would come in at $28.358 billion. Christie inherited that budget when he took office, and that budget eventually came in at $27.9 billion — $450 million less than OLS’s final projection, but a whopping $900 million below the official revenue projection that the Corzine administration certified.
The difference between the Corzine administration and Rosen revenue projections in 2009 paled in comparison to the gulf between OLS and Republican Gov. Donald DiFrancesco, the Senate president who had replaced Christine Todd Whitman in 2001 when she joined the Bush administration as head of the U.S. Environmental Protection Agency and was still hoping to succeed her when he introduced his Fiscal Year 2002 budget.
In his February 2001 budget speech, DiFrancesco projected a $22.874 billion budget for the upcoming year, but OLS Budget Officer Alan Kooney, under whom Rosen was serving as Revenue, Finance and Appropriations section chief, foresaw the coming economic slowdown and forecast in March an $836 million revenue shortfall.
Two months later, DiFrancesco – who was trying to help Congressman Bob Franks defeat conservative Bret Schundler in the upcoming GOP primary – was sticking to a $22.872 billion revenue forecast. However, Kooney and Rosen were predicting an economic tsunami that would cut revenue to $21.693 billion – a huge $1.2 billion difference in revenue projections. Nevertheless, DiFrancesco certified his own treasurer’s numbers.
Even the Kooney-Rosen projections proved optimistic after the 9/11 attacks on the World Trade Center further crippled the region’s economy. By May 2002, new Democratic Gov. Jim McGreevey was dealing with a $2.6 billion budget gap that he would fill with an increase in corporate taxes — but that budget gap would have been a more manageable $1.4 billion if the DiFrancesco administration had gone along with the OLS numbers.
Disagreements over revenues aren’t always partisan. Prior to the DiFrancesco budget, the biggest disagreement between an administration and OLS over revenues came in 1989, the final year of Republican Gov. Tom Kean’s administration, when Kean, Senate President John Russo (D-Ocean) and Assembly Speaker Chuck Hardwick (R-Union) enacted a budget at 4:07 a.m. on July 1 — after the budget deadline — that OLS and several veteran budget committee members from both parties pronounced unbalanced.
Seven months later, incoming Democratic Gov. Jim Florio inherited a budget that was $1.4 billion in the red — as OLS had predicted – and went on to enact the massive income and sales tax increases that ultimately doomed his governorship.
These major disagreements on revenue projections between OLS and Governors Kean, DiFrancesco and Corzine all came in gubernatorial election years when there was strong incentive for governors and legislative leaders to boost government spending for property tax rebates, school and municipal aid and other programs popular with voters.
Governors and treasurers and OLS forecasters rarely disagree widely on their revenue estimates in the third year of an administration because governors want to make sure that plenty of revenue is pouring in for their fourth and final budget, the one they will sign into law four months before they face the voters for reelection.
That is what makes this year’s disparity in March revenue projections between OLS and the Christie administration so surprising. The $392 million gulf in predicted revenue for the upcoming year is the second-largest difference in the last 15 years, ranking only behind the DiFrancesco reelection budget. The combined $536.9 million gap for the current year and the upcoming year is the fourth-largest in 15 years — behind the DiFrancesco election and two of Corzine’s budgets.
Brigid Harrison, the Montclair State University political scientist, characterized Christie’s spending plan for Fiscal Year 2013 as “an election year budget.”
But it isn’t a gubernatorial election year. The budget Christie will unveil next spring for Fiscal Year 2014 would be his election-year budget if he runs for reelection as governor Normally, governors would tend to be conservative in their third-year revenue estimates, making sure they kept a hefty budget surplus to avoid the need for mid-year program cuts in case of an economic downturn and lowballing their revenue estimates in the hope that a reelection-year surge would enable them to fund tax cuts or new programs.
Instead, Christie has proposed a budget that 1) relies upon aggressive projections amounting to 8.4 growth in income taxes and 6.0 percent increases in other major state taxes; 2) diverts more than $520 million in Clean Energy, Affordable Housing and other dedicated funds that will not be available next year as “one-shots” to balance this year’s budget; and 3) uses up $288 million from this year’s $588 million surplus. That leaves only a $300 million surplus — just 0.9 percent of state revenues — to fill the gap if revenues do not come in as high as Treasurer Andrew Sidamon-Eristoff has projected they will next spring.
Rosen characterizes his own projection of 6.5 percent revenue growth as “optimistic” and fully expects New Jersey’s economic recovery to continue, but he nevertheless projects that Sidamon-Eristoff’s revenue projections will come up $392 million short.
Meanwhile, the treasurer is confident that the $2.2 billion in increased revenue he is projecting from various sources, including the fund and surplus transfers, will come in.
Either could be right, or both could be proved wrong, as Rosen noted during his testimony Tuesday.
In the meantime, Christie has enough projected revenue to proclaim the “Jersey Comeback” — to enact an election-year budget that cuts income taxes and corporate taxes, puts in $1.1 billion to meet the state’s pension obligations, increases school aid, and expands programs for the developmentally disabled.
It’s a budget built to run on — a Jersey miracle with a 10 percent across-the-board income tax cut — and if Senate President Stephen Sweeney (D-Gloucester) is right, both the income tax cut and the budget are set up as much for a national campaign in 2012 as a governor’s race in 2013.
“The governor has a national agenda,” Sweeney said of Christie, a popular surrogate for Republican presidential candidate Mitt Romney and widely mentioned as a potential vice presidential nominee. “You can’t forget that.”
But projecting the highest revenue increase in the nation while budgeting one of the lowest surpluses is a lot like being a high-wire performer without a net. Christie not only needs his Fiscal Year 2013 revenues to come in, but also another big year of revenue growth in Fiscal Year 2014 to make up for this year’s $540 million in fund raids, $280 million surplus grab, plus $600 million more for pensions, and another $500 million or so for the next installments of his income and corporate tax cuts.
Christie might not like David Rosen any better this time next March.