5 things to know about the hearings into Gov. Christie’s $34.8B budget proposal
Lawmakers began their deep dive into Gov. Chris Christie’s $34.8 billion budget blueprint Tuesday, learning that there are no alarm bells to ring about revenues that would block them from previously scheduled haggling about gas taxes, estate taxes and Atlantic City.
Here are five takeaways from three hours of Tuesday meetings, with 37 more hearings to go:
Revenue consensus. Budget analysts from the Office of Legislative Services mostly concur with the Christie administration’s revenue projections, projecting $162 million less in tax collections over 15 months, around two-tenths of 1 percent. The gap is primarily about expectations for business taxes.
“Our revenue estimates are prudent, consistent with our steadily growing economy and also slightly below average five-year growth rates,” Acting Treasurer Ford Scudder said.
They also reflect the relatively slow turnaround of New Jersey’s economy, at least as compared with other states.
Though the number of jobs in the state grew at its fastest pace last year since 1999, the state trails the nation in recovering jobs lost in the Great Recession. The gross state product may have finally returned last year to its 2009 level, said Frank Haines, the legislative budget and finance officer.
“Overall, this is not what one would call a rapid rebound from the lows of the end of the previous decade,” Haines said. “But for the most part, growth in broad economic indicators and state revenues has been steady if not spectacular, and the outlook is for more of the same.”
It’s not just a happy convenience for the executive and legislative branches to share nearly identical forecasts. By having the same jumping-off point, it makes it easier for the sides to negotiate a budget. Or, at least, gives them one less thing to argue about.
“It’s refreshing that we’re not spending a lot of time debating the differences in revenue,” said state Sen. Paul Sarlo, D-Bergen, the Senate budget committee chairman.
“There has been nobody been more outspoken of the treasurer in the past on revenue forecasts that were overly aggressive, that did not match Office of Legislative Services and other independent, third-party agencies. I’ve been quite concerned about it. It made it very difficult to negotiate a budget,” said Sarlo.
That’s not to say there aren’t risks, OLS cautions. The budget counts on $250 million in health plan savings that haven’t been identified. It sets aside $10.4 million for clearing snow, when recent winters have rung up costs averaging $115 million. If a lawsuit succeeds requiring cost-of-living adjustments to be restored for pensions, that could cost the state $500 million.
Transportation Trust Fund. The budget includes $1.6 billion in state spending on the Transportation Trust Fund, though it doesn’t identify how to pay for that — whether from new taxes, new borrowing or a combination of the two. It’s a placeholder until negotiations yield a plan, hopefully before June 30.
“We have an obligation, here, to replenish the Transportation Trust Fund, once and for all, with no more Band-Aids and no more gimmicks,” Sarlo said.
“There is a way for the Legislature to act and implement a TTF with no gas tax increase,” said state Sen. Jennifer Beck, R-Monmouth, who advocates using regular growth in revenues, savings from changes to health benefits and merging transportation agencies.
Scudder predicted a reauthorization will be reached in time, as has happened five times before: “We have every confidence that such negotiations will reach their natural conclusion.”
Estate tax. The estate tax – one of two taxes that New Jersey levies on the wealth left by some people when they die – was a frequent topic of conversation, given lawmakers’ willingness to reduce or end the tax, potentially as part of a bargain over the gas tax.
Some senators called for eliminating it, though others suggested that instead the state might opt to raise the threshold at which it applies from estates worth $675,000, its current level and the lowest in the nation, to perhaps $2.5 million or the federal level, currently $5.45 million.
“Something’s wrong when you’re the worst at anything. It really is,” said state Sen. Jeff Van Drew, D-Cape May.
“Years and years down the road, looking back from heaven, what would you not do to leave an extra 16 percent of your estate to your children and grandchildren, rather than to my office?” Scudder asked lawmakers. “And if you don’t think people think that way, you’re just wrong. I mean, that’s what we work for, to pass money down to our offspring. That’s what we’re all on this earth for.”
“When I see you in heaven, you better have delivered a gas tax,” Sarlo responded, to laughs.
Tax refunds. Income tax refunds through March were running about $271 million ahead of last year’s pace, with 16 percent more refunds processed. Some of that has to do with the increase in the state’s earned income tax credit, but some has to do with the state’s faster processing of returns. Scudder said last year’s was delayed by concerns about fraud in electronic filings.
Atlantic City. Four senators took the opportunity to sound the alarm about the spillover effect that Atlantic City’s financial crisis could have on the credit ratings of other municipalities if the city defaults on its bonds or declares bankruptcy. (Christie says he wouldn’t approve a bankruptcy filing.)
Scudder said that outcome would lead to higher borrowing costs for other New Jersey municipalities and public institutions.
“It’s irresponsible for this bill not to be posted and drive everyone else and … drag all the municipalities of New Jersey and get a credit downgrade. It’s unfair,” said state Sen. Brian Stack, D-Hudson, who is also the mayor of Union City, which receives transitional aid and may be particularly vulnerable to a downgrade.
Stack is from the same county as Assembly Speaker Vincent Prieto, who is unwilling to allow the Atlantic City takeover bill to be voted upon unless its provisions affecting collective bargaining are changed. The Senate has approved the bill.
Christie has identified Stack and state Sen. Sandra Cunningham as the only two Hudson Democrats not under the political thumb of Jersey City Mayor Steven Fulop. Christie said Prieto and Fulop are working against the bill to hurt Senate President Stephen Sweeney, D-Gloucester, ahead of the 2017 gubernatorial race, a charge that the speaker and mayor deny.
Michael Symons has covered the Statehouse since 2000. He can be reached at email@example.com or @MichaelSymons_ on Twitter.