Democrats Move Compromise Budget Despite Revenue Concerns

Mark J. Magyar | June 21, 2013 | Budget
Budget committee chiefs not sold on treasurer’s projections, but hope he’s right

Despite reservations about Treasurer Andrew Sidamon-Eristoff’s revenue projections, the Senate and Assembly budget committees yesterday approved the $32.9 billion budget compromise hammered out by Gov. Chris Christie and Democratic legislative leaders in a week of closed-door negotiations.

As expected, the final budget bill was little changed from the spending plan Christie laid out four months ago: The governor agreed on just $97 million in spending increases, including $35 million to cover the cost of the merger of the University of Medicine and Dentistry of New Jersey (UMDNJ) and Rutgers University and $20 million for cancer research at the state’s reorganized medical schools.

“Nobody should be overly excited or thrilled over this budget,” said Senate Budget Chairman Paul Sarlo (D-Bergen). “We would have liked to have been able to add funding for women’s health clinics, for the Earned Income Tax Credit — which Ronald Reagan called the best program for the working poor — and more money for schools, but this budget is the best we could get.”

Assemblyman Declan O’Scanlon, the Assembly Republican budget offer, said Christie and the GOP would have liked to have included an income tax cut based on property taxes, but “the governor didn’t insist upon it because he didn’t want it to be a sticking point in the negotiations.” O’Scanlon praised the budget as a “responsible, fully balanced budget.”

As Republican legislators noted, the spending increases were offset by $97 million in anticipated savings in the state’s Medicaid and employee health benefits programs created partly by the implementation of the federal administration’s Affordable Care Act, but that wasn’t what worried Democratic budget experts.

Sarlo and Assemblymen Vincent Prieto (D-Hudson) and Gary Schaer (D-Bergen), the Assembly Budget Committee chairman and vice-chairman, all expressed continued concern about the $426 million gap in revenues between the budget their committees approved yesterday and the lower revenue estimates that David Rosen, chief budget officer for the nonpartisan Office of Legislative Services, provided last month.

Combined with a $247 million difference over how much revenue will eventually come In for the fiscal year that ends June 30, Treasury and OLS were $760 million apart on a budget that has less than $303 million reserved in surplus.

Sarlo said in an interview that he believes the revenue projections are “overly optimistic,” but that constitutionally it is the governor’s unilateral prerogative to certify revenues.

“I continue to have concerns about some of the governor’s revenue expectations,” Sarlo said. “The administration modified its projections for online gaming, but I believe its estimate is still too high. I don’t think we should be relying on the housing funds that are the subject of a lawsuit, and I am not fully confident the state will meet the executive’s estimates for tax revenue.”

The Christie administration lowered its revenue expectations from $180 million for the implementation of online gaming on a statewide basis managed by Atlantic City casinos to $160 million, but OLS projects the new program will generate no more than $40 million — a difference that accounts for almost 30 percent of the Treasury-OLS revenue gap.

Meanwhile, the courts have blocked the diversion of more than $160 million in affordable-housing funds from municipalities to the state’s general fund for the FY13 budget — which would be on top of the $247 million shortfall OLS is expecting for the current budget year.

“Time will tell,” Prieto said, adding that he believed that Sidamon-Eristoff was “not as overly optimistic” in his projections for the upcoming 2014 fiscal year as he was for the current year, when a revenue shortfall forced him to push off the payment of $392 million in property tax rebates from May to August. The three-month delay pushed the payment from FY13 to FY14, creating a one-shot savings that the Christie administration needed to balance the budget.

“We are all rooting for the economy to continue growing and for revenues to grow,” Prieto said, but noted that the difference in revenue projections between Treasury and OLS remained a concern.

Schaer, who voted against the budget in committee, was less charitable. He characterized the shift of the property tax rebates into the next budget year as a “shell game,” and sharply criticized the inclusion of just a $302 million surplus on a $32.9 billion budget.

“We’ve proven historically during the governor’s three years in office that the provision of just 1 percent in surplus is woefully inadequate, both in the case of revenue shortfalls and as protection against unforeseen events like major hurricanes,” Schaer said. “As a state government, we require our municipalities and counties to set aside more than a 1 percent surplus. Why should follow the same rules with the state budget.”

In addition to the $55 million provided for the Rutgers-UMDNJ reorganization and cancer research at the medical schools, the Christie administration and legislative budget leaders responded to the concerns of the healthcare community by providing $13.2 million for a cost-of-living increase for community providers who care for the mentally disabled, and $10.3 million more for nursing-home operators.

Christie guaranteed that no school district would receive less funding than last year by adding $7.4 million to the budget to cover increased debt service costs for school districts.

The budget compromise also provided $6 million in special property tax relief for municipalities in the Meadowlands that have been subsidizing regional costs for their less affluent neighbors, as well as $3 million in additional funding for community colleges.

Passage of the bills in the Senate and Assembly budget committees clears the way for final approval of the budget in both houses as early as Monday.

“We fought the governor over the last three budgets, and went through a lot of drama, pain and anguish,” Sarlo said. “This year, we decided to negotiate a budget we all could live with.”