Gov Chris Christie will
announce fiscal emergency,
freeze funds

By MICHAEL SYMONS • GANNETT STATE BUREAU
• February 11, 2010

TRENTON — Gov. Chris Christie will declare a state
of fiscal emergency today and freeze $1.6 billion in
unexpended funds, including $475 million that had
been intended as school aid, according to two
administration officials.

Christie plans to sign an executive order before a
scheduled 10:30 a.m. speech to a joint session of
the state Legislature allowing him, due to a budget
deficit he estimates at $2.2 billion, to direct the
Treasury Department to freeze funds, said the two
officials, who spoke on the condition they not be
identified.

Christie will not be requiring additional unpaid
furloughs of state workers in the fiscal year ending
in June beyond those state workers agreed to last
year — including Friday, incidentally, when state
government is closed. The state agreed last year not
to seek additional furloughs before July 2011 in
exchange for the union agreeing to nine furlough
days this year.

Christie will also announce $70 million in spending
cuts achieved by eliminating programs deemed to
be inefficient or ineffective.

Unspent funds from 375 line items in the state
budget will be frozen, with the largest being $475
million in school aid that then-Gov. Jon S. Corzine
had placed into reserve in December in anticipation
of budget-balancing maneuvers ahead.

Corzine's proposal was initially estimated as a way
to save $260 million, and the potential savings were
then increased to $300 million in January. But
lawmakers never acted before last legislative session
expired on a bill that will be required to compel
districts to tap their reserves to make up for the
withheld state aid.

Christie's proposal is an expanded version of
Corzine's plan. Aid will be withheld from 500 school
districts. Those with the largest surpluses — in a
sense, those that are run most efficiently — will
experience the largest losses of aid, while districts

with essentially no surplus won't be affected. Any
surplus used immediately won't be available to
offset property taxes next school year.


A Christie administration official says the school aid
reductions don't impact any approved school
budget funding, as any loss of state funds would be
made up for through local reserves.

Direct state aid to schools this fiscal year was
budgeted at $8.8 billion, meaning more than 5
percent is being withheld.

Frank Belluscio, a spokesman for the New Jersey
School Boards Association, said school districts
understand the state's fiscal situation but also have
concerns about maintaining school programs and
limiting property taxes.

"You look at the districts who would be paying for
that, who would be losing their surplus, are those
that have managed to get services or products at
lower amounts than anticipated — those that were
fiscally prudent. They felt that you might actually
wind up being penalized by this," Belluscio said.
"But the state has to look at preserving programs
above all else in the current year and avoiding
disruption mid-year."

"We really have to see the details about how they
would identify the surplus money. It sounds like
this might go beyond excess surplus, however, and
might go right into the 2 percent rainy-day funds.
But we'll have to see the specifics on that," Belluscio
said.

Christie will outline steps in his speech to the
Legislature to cure a $2.179 billion imbalance
between projected tax collections and anticipated
spending needs. The unresolved deficit — after
accounting for $655 million in cuts and new
revenue identified in December by Corzine — is
around $1.524 billion.

That unresolved deficit didn't account for any
savings from the school-aid maneuver, which — as
Corzine crafted it — would have withheld 75 percent
of the state aid due to any school district with a
surplus that exceeds 2 percent of spending,
compelling those schools to use local funds
instead. With that, Corzine outlined $955 million in
cuts and revenue.

Christie's administration projects that revenues this
fiscal year will be roughly $1.2 billion short of
forecast. Collections were $373 million short over
the first six months of the fiscal year, as of the end
of December, but the state projects that sales, realty
transfer and insurance premium taxes will decline.

The balance of the deficit was created by a start-of-
the-year balance that was $121 million smaller than
expected and more than $850 million in added
spending demands, much of it for safety-net
services such as Medicaid as well as snow removal
costs — which were $10 million over budget before
this week's storms.

Christie's speech to lawmakers, his first in the
Assembly chambers, is expected to take
approximately 25 minutes.