When the Christie budget for FY2014 was unveiled in late February, it looked like there would be almost nothing to fight over in April. The governor had taken the two largest potential issues off the table by fully funding the pension obligation to the tune of $1.6 billion and by agreeing to expand Medicaid.
If the pension had been underfunded, the unions and the Democrats would have howled that Christie was a hypocrite. If he had opted out of expanded Medicaid, critics would say he did it because it was part of Obamacare and Christie was protecting his right flank at the expense of 104,000 New Jerseyans without health insurance and at a cost to the state of $227 million.
The only thing looking remotely controversial was the administration’s decision to move the Homestead Benefit Tax Credit effective date from May 2013 to August 2013.
Clearly that was a gimmick. The delay means the $392 million dollar benefit (still popularly known as “the rebate”) will be charged to fiscal 2014 instead of fiscal 2013, so it won’t exacerbate this year’s revenue shortfall. That means the administration will get to skip a year of it while still being able to say residents will get a credit in calendar year 2013 and again in 2014.
But that was it.
After sitting through much of Treasurer Andrew Sidamon-Eristoff’s appearance before Vinnie Prieto’s Assembly Budget Committee, I can now say I and others of my profession underestimated the capacity of lawmakers of one party to find fault with the budget of a governor of the other party in an election year in which both they and the governor will be on the ballot.
So, what are those issues?
The Office of Legislative Services says the administration is overestimating revenues by $637 million for FY2013 and 2014 combined. Democrats say Christie is being too aggressive again this year in anticipating revenues that may or may not appear. Republicans say the recovery is under way, thanks to Christie, and the revenue shortfall for 2013 has not been nearly as bad as Democrats had predicted six months ago and a year ago.
The surplus for FY2014 is just $300 million. That’s about 1 percent of the total budget. Assemblyman Gary Schaer asked if it isn’t true that municipalities would be criticized for passing budgets with 3 percent set aside for surplus.
The Transportation Trust Fund has no pay-as-you-go funding for the second year in a row. Instead, the administration is doing something with existing transportation bond money that increases its “premiums.” Eristoff spent three lengthy paragraphs of his opening statement explaining the maneuver, but even Mark Magyar, this website’s budget guru, leaned over in exasperation and said he didn’t “get it.” Assemblyman Schaer noted that Gov. Christie’s original 5-year plan called for $260 million in “pay-go” in 2013 and $375 million in 2014. Democrats couldn’t believe the administration could fill that hole without new borrowing in 2014, but Eristoff assured them, while there was new borrowing in 2013 to cover the pay-go hole, there is no new borrowing in 2014.
The budget anticipates $120 million from privatization of the lottery in the form of an upfront payment from the firm that wins the contract. At the hearing, Democrats were wildly skeptical about this deal, of which they knew very few details. Eristoff said he couldn’t divulge much about a delicate negotiation — they would have to wait for the details. Eight days later, late on a Friday afternoon, the administration announced the terms of the deal, catching legislators and the media off-guard. It does indeed provide $120 million up front. But the administration only releases bad news late on a Friday; the fallout from this deal has yet to be debated.
The delay in the homestead benefit program continues to reverberate. Assemblywoman Bonnie Watson-Coleman said New Jersey homeowners are being “gypped.” Democrats say the FY2014 budget contains “no property tax relief.” They continue to maintain that property taxes have risen 20 percent under Christie because of a 20 percent cut in the rebate program in Christie’s first year. The Star-Ledger has run front-page headlines saying property taxes rose 2.4 percent and 1.7 percent the past two years—the smallest increases in two decades—but the Democrats apparently prefer to put their own spin on the matter.
The budget anticipates $180 million in revenue from Internet gaming. The legislation Christie signed a few months ago placed a 15 percent tax on Internet gaming, so the budget assumes $1.2 billion in total revenues in FY2014. Democrats are highly skeptical that an industry not even up and running yet will generate that much in the first year, even Democrats who pushed the bill, like Assemblyman John Burzichelli.
There is a fight in the courts over the state’s raid of municipal affordable housing funds. The issue is not settled, but the budget anticipates $150 million – 200 million. Democrats say it is likely that the courts will nullify the raid, and the money won’t be there for the state to use.
For many years the state has raided the Energy Gross Receipts Tax that is supposed to go to municipalities. It is happening again in the new budget. Municipalities don’t like it. The Administration says it’s necessary. Democrats are supportive of the towns rhetorically, although when the money gets allocated they’ll be happy to spend it.
Again this year the Christie budget raids the Clean Energy Fund. Environmentalists cry foul. Their friends in the Democratic Party cry with them.
The Christie budget seeks to reset the school-funding formula in a way that takes money from former Abbott districts. All told, there is $97 million more in school aid in the new budget, and the administration is quick to say no district loses a penny. What it’s less quick to say is that some districts get an increase of one dollar and that the governor is using the budget to scrap the 2008 Corzine school funding formula that was upheld by the state Supreme Court.
Overall debt has risen from $44 billion when Chris Christie took office to $71 billion today. Assemblyman Schaer harped on this during the hearing. Eristoff and the Republicans argued that there are two different kinds of debt, like good cholesterol and bad cholesterol.
The earned income tax credit has been a Democratic talking point since Christie cut it from 25 percent of the federal credit to 20 percent his first year in office. It’s money the Dems say means a lot to the working poor. Christie offered to restore it to 25 percent as part of his conditional veto of the minimum wage hike, but the Democrats didn’t buy into Christie’s phased-in minimum wage plan. His budget rescinds the offer.
So there you have it, the dirty dozen issues the Democrats sought to highlight as they launched the budget battle.
Was it tough sledding for Eristoff? Not really Other treasurers have had to defend far worse. Think Jon McCormac and the McGreevey budget that securitized 25 years worth of tobacco settlement money in order to balance one year’s budget. Or Bryan Clymer and the Christie Whitman pension bond deal of 1998. Both men survived, their sterling reputations intact.
Of course, the larger issue is whether the Republican governor has been a good steward of the state’s finances. The Christie budget increases spending by 2.3 percent. The governor is fond of saying it is still smaller than the Corzine FY2008 budget. There are no new taxes in it, and the governor is re-igniting the call for a tax cut. Republicans are also fond of saying the Democrats raised taxes and fees 115 times in the McGreevey-Codey-Corzine eight years.
Democrats argue the governor is borrowing too much, protecting the wealthy, providing too little property-tax relief, and hasn’t lifted New Jersey out of the recession. This ongoing dialogue will dominate the election season, perhaps along with guns and gay marriage.
Right before the hearing, a wily veteran of the budget wars said it would be interesting to see how much the Democrats attacked the budget on behalf of Barbara Buono. As it turned out, they attacked plenty. Whether they did it for Barbara Buono or for the sake of their own re-elections is open to question.