Introduction: 2010 – 2011 NJ Budget

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Three months ago, this year’s budget battle promised to be one of the most contentious in state history, with Democratic legislative leaders vowing to go to the mat to force Republican Gov. Chris Christie to extend the millionaire’s tax to avert deep cuts in property tax rebates, school and municipal aid and other programs.

But those who forecast a bitter impasse that would force the second shutdown of state government in four years were proved wrong when Democratic legislative leaders gave Christie just enough votes –four in the Senate and eight in the Assembly–to pass the biggest budget cut in state history.

The $28.364 billion state budget approved last night represents more than a $1.4 billion cut in the $29.8 billion state budget approved in Democratic Gov. Jon Corzine’s final year. That figure is sharply down from the $33.6 billion in state revenue appropriated and spent by Corzine and the Democratic Legislature three years ago in FY2008, before the Great Recession ravaged state tax collections. In fact, the $28.364 billion is the lowest state budget since Democratic Gov. Jim McGreevey’s FY2004 budget came in at $25 billion seven years ago.
The cut is even more substantial in total state spending, which includes federal aid, the Transportation Trust Fund and various dedicated funds and fees. While Corzine’s final budget spent a record $48.5 billion, Christie’s first budget cuts total spending by $2.5 billion to $46.0 billion, the lowest level in four years.

Pushing Problems Into Next Year

In the end, the compromise $28.364 billion state budget that Christie and Democratic legislative leaders agreed to a week ago is $97.1 million higher than the budget Christie proposed in March, despite a further decline in state revenues projected by the non-partisan Office of Legislative Services in May. (Click here for a series of charts detailing the major differences between Christie’s original budget proposal and S-3000, the compromise budget bill that Christie and the Legislature agreed upon.)

The new budget anticipates a $101.2 million decline in revenues, but essentially pushes the cost of the $97 million in new spending and the problem of how to deal with the revenue drop into next year by lowering Christie’s projected $500.8 million surplus to $300.2 million. That figure amounts to just over a 1 percent surplus, well below the 2 percent or more that the bond rating agencies prefer. The small surplus means that if state revenues come in even marginally lower at any point next year, the Christie administration will have to make further mid-year cuts in spending because there is no real surplus to cushion the blow.

Overall, the Democratic-controlled Legislature made $215.6 million in changes to Christie’s budget, but decided not to force a budget shutdown over the major issues. Christie succeeded in passing a balanced budget while rolling back the millionaire’s tax, cutting state aid to school districts by $828 million and slicing $848 million in property tax rebates. Democrats will campaign hard on all three of these issues in the midterm legislative elections in 2011.

Democrats made their final changes in the Senate yesterday, restoring $7.5 million for family planning clinics cut by Christie, who is New Jersey’s first anti-abortion governor since the U.S. Supreme Court’s Roe v. Wade ruling legalized abortion. The bill passed the Senate by a 30-10 margin, sufficient to override an expected Christie veto; the $7.5 million state appropriation is expected to draw down $67.5 million in federal matching funds. The Democrats also switched $26.4 million from the state’s charity care program to expand Family Care coverage to 39,000 more working parents.

Small But Significant Restorals

Some of the most important budget restorations achieved by the Democrats did not involve large sums. It cost just $6.4 million to keep the Garrett W. Hagedorn Gero-Psychiatric Center open–a rare victory for the state’s public employee unions that Christie has attacked so vociferously. A $4 million appropriation from the New Jersey Cultural Trust’s principal will keep the Old Barracks Museum fighting the Revolution in Trenton, the Battleship New Jersey afloat in Camden and the Newark Museum from having to make severe budget cuts. A $3.5 million appropriation will keep the State Commission of Investigation, an independent investigatory body created by the Legislature to probe corruption and waste, independent of the executive branch, a.k.a. the Christie administration. New Jersey’s public libraries, which were facing deep cuts, got a $4 million aid restoration. And a $1 million appropriation for New Jersey STARS will preserve the program that provides scholarships first to community colleges and then to four-year state colleges for high-ranking New Jersey high school seniors who agree to stay in-state for college.

Democrats also forced Christie to back down on his plan to eliminate the popular ban on Sunday sales in Bergen, which is expected to be a major issue in this November’s Bergen County executive and freeholder races. Christie anticipated Sunday shopping in Bergen would have generated $63 million in additional sales tax revenue, but agreed to use additional revenue expected from tax compliance and corporate audit programs to fill the gap.

A Bloodless Victory

In the end, the battle over the budget this year paled in comparison to Democrat Brendan Byrne’s fight to pass the income tax almost 35 years ago and Democrat Jim Florio’s $2.8 billion tax increase 20 years ago. Republican Governor Christie achieved a relatively bloodless victory, considering the fact that he was the first governor forced to pass a budget with both houses of the legislature controlled by the opposing party since Florio had to contend with a Republican legislature elected in an antitax backlash in his final two budgets in FY1993 and FY1994. This year’s budget battle came after a recession second only to the Great Depression in its impact this century, and with the state facing a budget deficit of historic proportions, exacerbated by an expected $1.2 billion reduction in federal stimulus aid. In response, Christie proposed a $2.8 billion cut in actual state spending, including both state and federal sources of revenue, which was by far the largest such cut not only in dollars but in percentage, and succeeded in winning Democratic acceptance of a $2.5 billion cut that left most of his cuts in place.

The following package of charts, some going back 12 years, provides perspective on some of the major spending and revenue issues in the budget.