Here we go again.
For the second straight year, Democratic legislative leaders are putting forward a budget that spends more on public-employee pensions, backed with increased revenue from proposed tax hikes on high earners and corporations.
That puts them back on a direct collision course with Gov. Chris Christie.
Last year, Christie, a Republican who preaches fiscal discipline, vetoed similar tax hikes and used the line-item veto to remove more than $1 billion in spending from the budget bill that was sent to him by the Democrats, who have control of the Legislature.
This year, with Christie seriously considering a run for president in 2016, there’s no reason to believe he’ll change his mind on the tax hikes or the Democrats’ attempt to push state spending to over $35 billion for the fiscal year that begins July 1.
Still, the Democratic leaders said there’s a reason they’re repeating the exercise. They insist that it’s important for them to craft and advance a budget they believe better represents the priorities of New Jersey’s residents.
“A lot of work, a lot of time was put into it,” said Senate President Stephen Sweeney (D-Gloucester).
A key to the Democrats’ budget is a proposed $3.1 billion payment into the chronically underfunded state pension system, which is more than double the $1.3 billion contribution Christie proposed in his $33.8 billion budget he put forward in February. The Democrats are also seeking to hike funding for higher education and family-planning clinics, and to restore Christie’s cut to a tax-credit program for low-wage earners.
“With this plan, we are cutting debt, meeting our obligations, and protecting core values such as healthcare for women, quality education, tax relief for hard-working families, job creation, and tax fairness for everyone,” said Assembly Speaker Vince Prieto (D-Hudson).
But the Democrats’ proposal right now includes no funding to prevent a proposed 9 percent New Jersey Transit fare hike that’s looming later this year. Also left out was revenue from a rewriting of corporate-tax policy that liberal groups and public-worker unions have been pushing for to address a loophole that benefits multistate corporations.
The introduction of the Democrats’ budget bill comes with only about a week left in the state’s fiscal year. The current legislative schedule calls for budget committees in both the Assembly and Senate to take up the Democrats’ proposed $35.3 billion spending plan today. Final legislative approval could come as early as Thursday.
Despite their differences, the state constitution requires the governor and lawmakers to adopt a balanced budget by July 1. The constitution gives Christie the authority to certify revenues and he can delete items from the budget lawmakers send him, but he cannot make additions.
And for Christie, this year’s budget considerations come with a new wrinkle. He’s spent much of the past year laying the groundwork for an expected run for president in 2016, and his actions on the budget over the next week are sure to be closely scrutinized by potential primary opponents in an already crowded field of GOP candidates.
The budget developments also come as Christie’s office announced yesterday that state Treasurer Andrew Sidamon-Eristoff, who’s been with the second-term governor since he took office in early 2010, is stepping down at the end of the month.
Christie’s office did not respond when asked for comment on the Democrats’ budget proposal yesterday. But Republican lawmakers immediately criticized it — with some speaking out against it before the Democrats’ spending plan had even been officially released.
“Their solutions always involve raising taxes,” said Assembly Minority Leader Jon Bramnick (R-Union). “It’s bad public policy
Under the Democrats’ plan, a new income tax rate on earnings over $1 million would be established for the next four years, upping the current rate of 8.97 percent that kicks in on earnings over $500,000 to 10.75 percent on earnings over $1 million. The corporate tax rate would also be hiked from 9 percent to 10.5 percent for one year. The two changes would generate a little over $1.1 billion, according to the Democrats’ projections.
The Democrats say the only reason they have to resort to tax increases is because Christie’s policies have not generated the economic growth that was needed to live up to promises made in a 2011 bipartisan pension-funding law that called both on the state and on public workers to increase funding to the pension system, which covers the retirements of an estimated 773,000 current and retired workers.
Christie has since gone back on the promise to increase the state funding — a decision backed by a state Supreme Court ruling released earlier this month — even as the employees have been paying more.
“The current course has led to credit downgrades and increased state debt, and is unacceptable,” said Assembly Budget Chairman Gary Schaer (D-Passaic).
The Democrats, meanwhile, are also banking on tax collections to increase during the next fiscal year by more than $400 million above the Department of Treasury’s most recent estimates. And they’ve also proposed a budgeting maneuver that would see a projected $300 million tax windfall generated during the current fiscal year applied to the larger state-pension contribution they’re planning for the next fiscal year.
After having criticized Christie in recent years for relying on optimistic revenue projections, the Democrats defended their own higher projections yesterday.
“We think a good portion of it will” carry over, said Senate Budget and Appropriations Committee Chair Paul Sarlo (D-Bergen).
But Senate Minority Leader Tom Kean Jr. (R-Union) raised concerns about the impact the proposed tax hikes would have on the state’s economy if they were to go into effect. He pledged during a news conference organized by business groups that Republican lawmakers would stand united in opposing the tax hikes, just as they did last year.
“We will win that fight again this year,” Kean Jr. said.
And Bramnick said if the Democrats’ goal is putting the pension system on firmer footing, the better option would be considering cost-cutting reforms that were proposed earlier this year [link:https://www.njspotlight.com/stories/15/03/01/should-the-state-offload-teacher-retirement-benefits-onto-local-school-districts/|by a panel of experts Christie commissioned to study the benefits issue.
“If you continue down this road I think you continue to lose competitiveness with other states,” Bramnick said.
Tom Bracken, president of the New Jersey Chamber of Commerce, said the tax hikes would have a “ripple effect.” Business leaders will be put off if taxes are increased, resulting in fewer jobs for those at lower income levels.
“We continue to play these unproductive political games while the New Jersey economy suffers,” Bracken said.
And Jeff Tittel, director of New Jersey’s Sierra Club, criticized the Democrats for not finding enough funds, about $60 million, to head off the 9 percent New Jersey Transit fare hike and service cuts on course to go into effect on October 1.
“These cuts and fare hikes are unfair to commuters and now it looks like it will happen thanks to the Legislature,” Tittel said.
But the Democrats’ proposal won praise from liberal groups, including the New Jersey Working Families Alliance.
“The simple fact is that corporations and people making over $400,000 per year are paying less in taxes than they did five years ago, while everyone else picks up the tab,” said Analilia Mejia, director of the organization. “Thankfully, Democratic legislators have heard the call of working families from around the state and are proposing a budget that ends tax cuts for the wealthy and corporations so that we can meet our obligations and give working families some relief.”