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The Record - Christie's budget hinges on federal aid for storm relief ‘…The budget Christie will present Tuesday lays out the billions he plans to spend on public education, health care, property tax relief and other state programs … Spokesmen for both Christie and the Department of Treasury declined to provide details ahead of Christie’s budget presentation, and lawmakers said they are not scheduled to be briefed until hours before the governor’s speech Tuesday afternoon. Christie himself said little about the new budget during a campaign event in Sea Bright last week…“Budgets, which we’re about to put forward, are statements of priorities, and how you spend your money is often an indicator of what you think is important,” Christie said…’
The Record - Christie's budget hinges on federal aid for storm
Sunday February 24, 2013, 11:47 PM
BY JOHN REITMEYER STATE HOUSE BUREAU The Record
Governor Christie is banking on the billions in federal aid for superstorm Sandy to help rebuild New Jersey and boost the state budget he’ll pitch Tuesday. But it’s unclear what impact a Sandy stimulus would have or whether federal spending cuts would mean less aid. Some lawmakers and budget experts are warning governors like Christie to be cautious given that uncertainty and the already struggling economy.
In his prior budgets, Christie, a Republican, emphasized business tax cuts, corporate tax breaks and improved communications with so-called job creators as paths to economic growth. That growth has yet to materialize. Unemployment in New Jersey has remained among the highest of all U.S. states, and tax collections have yet to rebound with the force Christie projected in early 2012.
Now, as Christie readies for his reelection bid and is considered by many in the GOP as a possible presidential contender in 2016, his biggest budget boost is coming from Democratic President Obama.
“We’re all hoping if anything positive could come from Sandy, it’s a bounce to the economy,” said state Senate Budget and Appropriations Committee Chairman Paul Sarlo, D-Wood-Ridge.
The budget Christie will present Tuesday lays out the billions he plans to spend on public education, health care, property tax relief and other state programs. It’s a chance to detail new initiatives like last year’s drug court project. And it’s also where Christie says he plans to get the money, mostly from sales, income and corporate taxes. Last year he pitched an attention-grabbing start to a 10 percent cut to the income tax, which Democrats opposed and the economy delayed. This budget may get even more attention as Christie prepares to run for reelection and may be wary of calling for unpopular spending cuts.
Sandy spending — largely by consumers even before the federal aid starts to arrive — appears to be having an impact already. Tax revenues, after months of missing Christie’s ambitious targets for economic growth, have increased in the last two months. But a gap of at least $350 million remains in the current $31.7 billion budget, which Christie must address with either cuts or more revenue before the Legislature signs off on any new spending proposal.
All state budgets must be balanced under a constitution that does not allow deficit spending.
It’s unclear whether any Sandy stimulus will come with enough force to right the state’s economy, which has already failed to prop up two of Christie’s main economic development projects, the entertainment and shopping complex American Dream Meadowlands and the Revel casino in Atlantic City.
And if a Sandy stimulus does spark the state economy — an economy that did not grow as fast as Christie predicted until recent months — it might mask the lingering weaknesses that have kept unemployment high and overall growth slow.
Treasurer Andrew Sidamon-Eristoff said in a statement last week that strong income and sales tax collections in January indicate “the fundamentals of the state economy are firming up in a way that bodes well for the rest of the fiscal year.”
Adding to the uncertainty is the looming federal budget cuts — known as sequestration — that could reduce the size of the Sandy relief package that was approved by Congress last month. It’s unclear right now what those cuts will mean to the aid package coming to New Jersey, or whether Obama will strike a deal with Congress before Friday’s deadline.
The federal spending cuts could also take other dollars away from New Jersey’s budget and, economists warn, bring on more economic sluggishness that could affect New Jersey tax collections.
Democrats, including Senate President Stephen Sweeney of Gloucester County, have been critical of Christie’s work on the economy, saying it’s too focused on Sandy.
Sweeney said he wants to hear about more than just the latest on the storm recovery in the governor’s budget speech.
“When those dollars are gone, we’re going to have the same problem,” Sweeney said.
“The problem with stimulus money is it goes away,” he said. “We still have to come up with a plan to fix the state’s economy.”
Treasury officials are pointing to modest revenue gains that the state enjoyed in December and January — the first months in nearly a year that tax collections met Christie’s budget targets — as signs of improvement.
But non-partisan legislative budget analyst David Rosen said last month that he doubts the stimulus effect of the Sandy rebuilding will be strong enough to overcome the state’s revenue shortfall, at least in the near term.
And a report on state revenues issued this month by the Albany-based Rockefeller Institute of Government warned that recent gains could be a mirage, more attributable to federal policies than any state factors.
“It will be hard for states to interpret data in coming months and hard to rule out the possibility that any short-run revenue surge is simply borrowed from the future,” said the authors of a report.
“Caution should be the watchword,” the report said.
Spokesmen for both Christie and the Department of Treasury declined to provide details ahead of Christie’s budget presentation, and lawmakers said they are not scheduled to be briefed until hours before the governor’s speech Tuesday afternoon. Christie himself said little about the new budget during a campaign event in Sea Bright last week.
“Budgets, which we’re about to put forward, are statements of priorities, and how you spend your money is often an indicator of what you think is important,” Christie said.
But Christie has made it clear in recent public events that the recovery from Sandy is his top priority. The governor recently announced he expects the first $1.8 billion batch of aid to come in by April.
Christie explained in an interview this year with The Record how the mechanics of the Sandy recovery effort could help the state budget.
The rebuilding projects will mean more sales tax revenue from all the materials that will be purchased to make repairs, he said. There should also be more income taxes collected from the people hired to do the work, and presumably more business tax revenue from companies involved in the Sandy activity.
“We’re now starting to have rebuilding going on,” Christie explained.
Keeping the focus solely on Sandy makes a lot of sense for Christie politically, said Patrick Murray, director of the Monmouth University Polling Institute.
Typically, when governors run for reelection, they have to explain to voters their plans to create jobs and address property tax bills, which are still at an all-time high in New Jersey.
But Christie is smartly driving all the emphasis to the Sandy recovery right now, Murray said.
“What the governor is trying to do here is keep Sandy at the top of the list and push jobs and property taxes further down the list,” he said.
And Christie should have no concern that Republicans in the future will be upset with a GOP governor who used billions in federal aid that many conservative representatives in Congress opposed.
“When an event like this hits, everybody gets a pass on those kinds of questions,” Murray said.
But the aggressive approach to the recovery that Christie is leading — New York is also in rebuild mode, but with more talk of land preservation and buying out flood-prone properties — doesn’t come without risk.
By rebuilding and repairing, particularly in areas where there’s increased risk of future storms and greater damage, costs would continue to mount, environmentalists warn.
“The governor is trying to put the best face on things, so they’re moving ahead with projects even in places where it might not make the most sense,” said Jeff Tittel, director of New Jersey’s Sierra Club. “He wants the revenue for the budget.”
Staff Writer Melissa Hayes contributed to this article. Email: reitmeyer@northjersey.com
