State lawmakers put Gov. Chris Christie’s treasurer on the defensive yesterday for much of his first appearance before them since the governor proposed a new state budget last month.
The Assembly Budget Committee’s members questioned Treasurer Andrew Sidamon-Eristoff on property tax relief funding, public-employee pension contributions, and the stability of transportation spending included in the $33.8 billion budget Christie has put forward for the fiscal year that begins July 1.
They also wanted to know more about fees paid to outside pension fund managers and the impact of recent credit-rating downgrades.
But on state revenue projections — an area where lawmakers have spent considerable time in the past grilling Sidamon-Eristoff — there was little disagreement yesterday.
That’s because David Rosen, the veteran nonpartisan legislative staffer who analyzes the budget and the annual revenue forecast, said earlier yesterday that his own revenue projections are nearly identical to Christie’s for the next fiscal year.
That’s a far cry from some prior years, including in 2012, when Christie called Rosen the “Dr. Kevorkian of the numbers” for putting forward a much less rosy forecast than the governor had at the time as he was trying to make the case that New Jersey could afford an across-the-board income-tax cut across-the-board income-tax cut. Rosen’s projections ended up being closer to actual tax collections than Christie’s that year.
“I am pleased that this year’s budget discussions will not feature a clash of conflicting revenue forecasts,” said Rosen, budget officer for the Office of Legislative Services.
Still, there were plenty of places for disagreement when Sidamon-Eristoff came before the committee in the afternoon.
[related]The hearing yesterday was the first in a series that lawmakers will be holding in Trenton as they closely evaluate Christie’s budget in advance of a July 1 deadline set in the state constitution for adoption of a balanced spending plan. Sidamon-Eristoff is also scheduled to appear before the Senate Budget and Appropriations Committee this afternoon.
In one of the more pointed exchanges yesterday, Assemblyman Troy Singleton (D-Burlington) pressed the treasurer for details of the administration’s contingency plan in the wake of the Feb. 23 state Superior Court ruling that called on the state to contribute $1.6 billion more into the pension system than called for in Christie’s budget for the current fiscal year.
“A lot of this is moot unless we can address that concern,” Singleton said.
Christie is appealing the court ruling, which hinged on pension reforms he signed into law in 2010 and 2011, including a promise to make increased contributions over a seven-year period – a promise that Christie has now abandoned.
“The administration is of course quite confident in our position,” Sidamon-Eristoff said.
But pressed by Singleton further for evidence of any planning, the treasurer said he has engaged with legislative leaders and has begun talking about where there may be “unspent balances and the like.”
The treasurer was also questioned about funding for annual state transportation spending, a subject that has received a lot of attention as the current source of revenue for the Transportation Trust Fund — tolls and the state’s 14.5-cent gas tax — will only raise enough money to go toward paying off the fund’s $18 billion debt later this year.
Christie has been negotiating with lawmakers on a new source of revenue for the trust fund, and a gas tax hike has been “on the table” in those talks, but legislative leaders say they have cooled as lawmakers have now begun to focus on this year’s legislative elections – all 80 seats in the Assembly are up for grabs in November – and as Christie has turned his attention to his potential participation in the 2016 GOP presidential primary.
Rosen explained to lawmakers during his morning appearance that funding for the next year has been “cobbled together” with borrowed money and funds from other sources, like a repaid loan to New Jersey Transit.
But he made clear there’s no additional cash or other source of transportation fund revenue established yet for the fiscal year that begins July 1, 2016.
“We can squeeze through (fiscal year) 2016, but if 2016 goes forward as laid out in the budget, we begin (fiscal year) 2017 with no cash balance and no source of revenue to pay for the unfinished projects,” he said.
Sidamon-Eristoff, when he spoke to the committee later, said there is “no proverbial Sword of Damocles hanging over” the transportation fund for the next fiscal year. But he acknowledged “the critical need to secure a new reauthorization.”
Still, Assemblyman John Burzichelli (D-Gloucester) asked Sidamon-Eristoff if he was satisfied with how things currently stand.
“Am I satisfied? I’m satisfied that we have sufficient funding for the appropriate and continued operation of the capital transportation program through fiscal 2016,” the treasurer replied.
And when Burzichelli pressed him on the hundreds of millions of dollars in management fees that have been paid to some private-equity fund managers as a result of some pension system investments during Christie’s tenure, Sidamon-Eristoff ripped news reports that he said have unfairly portrayed “carried interest” as fees.
“We have nothing to be ashamed of whatsoever,” he said.
He also disputed notions that recent credit-rating downgrades – two ratings agencies cut New Jersey’s credit twice last year amid a $1 billion revenue shortfall, with another reducing the rating once – have led to increased borrowing costs.
“Frankly, low-interest rates have been our friend,” Sidamon-Eristoff said. “I don’t think the impact on the state budget has been anything but negligible.”
Homestead tax relief at risk?
Another pointed exchange took place later on, when Assemblywoman Eliana Pintor Marin (D-Essex) asked about funding for Homestead property tax relief, which is set to fall to the second-lowest total of Christie’s tenure. She also noted there were no payments in 2010 and 2014, and asked Sidamon-Eristoff if recipients, including seniors, the disabled and low- and moderate-income homeowners, would be compensated for the skipped years.
The treasurer said payments are on schedule to be paid again this year in May, but that there is no money right now to cover the years the payments were skipped. And he warned that an unsuccessful appeal in the pension case could result in another year with no Homestead relief.
“Again, this has been a function of the constraints we’ve all been operating under for a number of years,” Sidamon-Eristoff said.
Assemblyman Declan O’Scanlon (R-Monmouth) asked why Democrats, if they were so concerned about Homestead relief, also shifted the payments in the budget bill they sent Christie last June.
He said Republicans are interested in boosting property tax relief if the Democrats truly are serious.
“It’s just a matter of where do we find the money,” O’Scanlon said.
Rosen, earlier in the day, said you have to go back roughly two decades to find revenue forecasts more closely aligned between an administration and his office.
Through the end of June 2016, the legislative estimate for tax collections is just .02 percent off the administration’s forecast. The legislative staff is projecting slightly less revenue than the Christie administration over the final few months of the current fiscal year, about $22.5 million, but slightly higher tax collections during the fiscal year that starts July 1, about $38.6 million.
So with no huge gap in projections to explain, Rosen instead focused on policy areas that he said lawmakers have been asking him about, including inheritance taxes, the impact of corporate business-tax credits, and the relatively small size of the budgeted surplus fund.
“It just turned out that way,” he said afterward. “It’s good if we don’t waste time arguing over who’s right.”