Winners and Losers: Looking Beyond the Numbers in Christie’s $34B Budget

Millionaires and corporations gain, while homeowners and local schools take a hit. But the biggest setback may be to New Jersey’s future generations

comedy and tragedy masks
For the second straight year, Gov. Chris Christie enacted a new state-spending plan by using the line-item veto to alter the budget bill that was sent to him by Democrats who control the Legislature. That means some features of the
Republican governor’s original budget proposal made it into the plan, as well as some favored by the Democrats. And some new elements were added to the final version of the budget as well.

Here’s a look at which groups emerged as winners and which ones ended up losers in the final version of the budget, which will now be in place until June 30, 2016.


Corporations: Christie held firm and maintained the status quo by vetoing a bill sponsored by Democrats that would have raised more money for the budget by hiking the corporate tax rate for one year. The result is companies get to keep an estimated $435 million that would have gone into the state’s coffers had the tax hike been signed into law. And the final version of the budget also bumped up a series of business-tax cuts to $660 million.

Millionaires: Once again Democrats sought to increase the top-end personal income tax rate on earnings over $1 million from 8.97 percent to 10.75 percent. And once again Christie vetoed the measure. That means the roughly 17,000 New Jersey residents who earn over $1 million will keep an estimated $688 million instead of seeing that money spent in the budget by state lawmakers.

Low-wage earners: In an unexpected wrinkle, Christie’s rejection of the Democrats’ millionaire’s tax bill came in the form of a conditional veto that also proposed to increase the state’s Earned Income Tax Credit from 20 percent of the federal credit to 30 percent of the federal credit. Though technically outside of the budget, Christie’s proposal, which lawmakers are expected to approve today, will mean roughly 500,000 of the state’s lowest wage earners will get to keep an estimated $120 million in their own pockets.

Public employees: It seems odd to list public workers as winners for a budget that underfunds the state’s 2010 and 2011 public-employee pension-funding laws by nearly $2 billion. But the $1.3 billion Christie left in the budget for the public-employee pension system will amount to a record contribution for the state for one fiscal year. And it puts the state back on a path to making the full contribution sought by actuaries in 10 years after two years of unstable funding. Another key win for employees was also scored by rallying Democratic leaders to oppose Christie’s late-winter push to enact sweeping benefits changes, including freezing the current pension system and cutting back health coverage. None of those changes came close to going into effect, and union leaders can now look forward to working with a less hostile administration in a few short years when Christie’s second term expires.


[related]Homeowners: Property-tax bills in New Jersey went up on average last year by $173 to $8,161. But the new budget, despite increasing overall spending by roughly $1 billion, keeps funding flat for Homestead property-tax relief credits. The budget also failed to expand eligibility rules for those credits, which average $515 for seniors earning up to $150,000 and $404 for all other homeowners earning up to $75,000. That means many homeowners will still end up paying higher net-property-tax bills once again due to the flat funding for property tax relief in Christie’s budget.

Commuters: The final version of the budget didn’t include enough funding for New Jersey Transit to head off a proposed 9 percent fare hike that’s due to go into effect in September. And though Christie’s original spending plan set the stage for the fare hike, Democrats didn’t make the issue a funding priority either in the $35.3 billion budget they sent Christie last week. The expected fare hike will also come on the heels of a more than 20 percent increase that went into effect just a few years ago in 2010.

Local schools: School administrators have long argued that flat funding is effectively a cut, since their costs are constantly on the rise. The new budget provides total formula-aid to schools of just over $9 billion, a marginal increase compared with the prior fiscal year. Spending on education in the new budget also falls short of the total amount called for under the state’s school-aid law by more than a $1 billion, forcing many school districts to either make cuts or bridge the gap using their own budgets.

Future generations: Though the $1.3 billion payment for the public-employee pension system is a record for the state, it is far less than the roughly $4 billion that would have to be contributed during the next fiscal year to help address an unfunded liability measured to be at least $40 billion. And by switching the state from a seven-year ramp to full funding of the annual payment called for by the actuaries to a 10-year ramp up, taxpayers will end up paying an extra $12.4 billion in the long run, according to an NJ Spotlight analysis. The budget also failed to include the $600 million in “pay-as-you-go” funding for transportation-infrastructure projects that Christie once planned for, resulting in more borrowing that pushes even more costs for today’s projects onto future generations.

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