Press of Atlantic City - Gov. Chris Christie presents $32.1 billion budget proposal with income-tax cut, promise of no new taxes

New Jersey Gov. Chris Christie arrives at the Assembly Chamber of the Statehouse in Trenton on Tuesday to deliver his budget address before the Legislature.

Press of Atlantic City - Gov. Chris Christie presents $32.1 billion budget proposal with income-tax cut, promise of no new taxesBy DEREK HARPER, Staff WriterpressofAtlanticCity.com | 0 comments

Gov. Chris Christie firmly ruled out new taxes when he proposed the state’s $32.1 billion budget in a speech Tuesday in Trenton.

“Just so there is no mistake in my intention: I will veto any tax increase again,” he said.

Christie reiterated his call for a 10 percent income-tax cut, to be phased in over three years, characterizing it as a way to benefit residents who have scrimped in recent years.

“We have done the hard work to get where we are today — to fund what matters while at the same time finally providing long-overdue tax relief,” he said.

The governor’s proposed budget relies on a recovering economy to provide significant revenue increases that would offset the proposed income-tax cuts, while at the same time providing additional state funding for education and leaving municipal funding virtually flat. It increases overall spending by 3.7 percent.

Lawmakers now will review the proposal and make changes, with a vote expected before the June 30 end of the fiscal year.

Christie spent the largest portion of his 40-minute speech talking about the proposed 10 percent cut to state income taxes, but did not directly address how the state would recover the revenue.

The cut will reduce the amount collected by $1.7 billion over the three-year phase-in, according to the Legislature’s nonpartisan research arm, the Office of Legislative Services. That includes $150 million in the budget year that starts July 1.

The budget says the cut will amount to $9.4 billion in tax relief over the next decade for state residents.

Even with the first phase of the cut, the budget projects the state’s income tax to yield $11.8 billion in the fiscal year that ends June 30, 2013, a figure $705 million greater than the current-year projections.

The budget document states that “the anticipated increase in income tax revenue reflects the continuing pickup in the growth of household income,” although no specific amounts are given.

The state’s income-tax rates increase with income, so wealthier residents will generally benefit most from the cut. Democrats and others have attacked the proposal as a giveaway to the richest residents.

“To the naysayers, I say this,” Christie said in his speech. “We have been down the road of high taxation. It didn’t work. The result was high unemployment, high taxes and low growth. The result was families leaving New Jersey.”

Democrats, who control both houses, want Christie to cut property taxes instead. With New Jersey’s property-tax burden the highest of any state in the nation, they say residents are in dire need of property-tax relief. Christie says the 2 percent property tax cap adopted last year has already slowed the rate of property-tax growth.

“He’s wrong,” Senate President Stephen Sweeney said. “We’re not going to stand back and support an income-tax cut that’s only going to benefit the wealthy and give crumbs to the middle class.”

For lower-income residents, the governor also proposed increasing the state Earned Income Tax Credit from 20 percent to 25 percent. That program provides a tax deduction for state residents earning $10,000 or less ($20,000 for married couples), allowing them to take a percentage of the federal Earned Income Tax Credit off of their state taxes.

Eligible families would receive about $550 on average, according to the budget.

The governor spoke most forcefully on education, devoting several minutes to what he said was the “moral obligation” to provide good schools for all of the state’s children.

“We have great outcomes in some districts. But we have terrible performance in others. That is not right, it is not fair and it is not moral.”

The proposal would increase aid to state colleges by 6 percent, while direct aid to the state’s grade schools would increase by $212.5 million.

Property-tax rebate programs for homeowners and senior citizens would remain funded at current levels under the proposed budget. Christie also proposed flat funding for hospitals, which were cut last year.

Municipal aid would remain unchanged, though less transitional aid money would be available to financially strapped cities and towns.

The budget includes $89 million to fund Christie’s transportation capital plan.

Christie’s budget also would make a $1.1 billion payment to the severely underfunded pension system, up more than a half-billion dollars from the current year’s contribution. The state agreed to phase in its annual contribution to the pension system after Christie signed legislation requiring government workers to pay more toward their retirement.

Brigid Harrison, a Galloway Township resident and political science and law professor at Montclair State University, said the governor’s talk about prioritizing the needs of poor schoolchildren, homeless veterans and the disabled “took a page out of the Democratic capital-D playbook.”

She was surprised that Christie drew a line in the sand on tax increases, given the tenuous nature of government revenues.

Local legislators generally praised the governor’s speech, but Democrats said they wanted more details.

Sen. Jeff Van Drew, who sits on the Senate Budget and Appropriations Committee, said the governor’s speech was “powerful”and he agreed with the fundamental premise of not increasing taxes.

But Van Drew, D-Cape May, Cumberland, Atlantic, said he remained concerned about the fate of the local state Developmental Centers in Woodbine and Vineland. The centers, which provide live-in services for developmentally disabled adults, are under review by a state task force that may recommend closing them.

Assemblyman Brian Rumpf, R-Ocean, Burlington, Atlantic, said even while the proposed income-tax cut amount wasn’t large, the move indicated to businesses that New Jersey is becoming a friendlier state.

Rumpf said he also supported the additional veterans’ spending and liked the governor’s education focus.

Rumpf’s Republican districtmate, DiAnne C. Gove, said she liked Christie’s proposal to increase Earned Income Tax Credits, as well as state aid to higher education and funding of the state pension system.

Gove said she also supported the governor’s proposal to use the closing of a Hunterdon County psychiatric hospital to expand the state Veterans Haven transitional housing program there.

Sen. Jim Whelan, D-Atlantic, said Christie “makes a good speech, there’s no question about that,” but added that he still had reservations on the income-tax cut.

“You’re going to give everybody a cut, and the typical family of New Jersey, the first year their cut’s going to be 30 bucks or less, while the millionaire gets several thousand dollars,” he said.

The Associated Press contributed to this report. Contact Derek Harper:609-272-7046 DHarper@pressofac.com

Philadelphia Inquirer – Politics - Christie proposes $32.1 billion N.J. budget with slight increases in spending

Posted: Wed, Feb. 22, 2012, 8:19 AM By Matt Katz Inquirer Trenton Bureau

Armed with a rosy revenue projection, Gov. Christie proposed a $32.1 billion budget Tuesday that sprinkles additional funding throughout the state - including a modest increase for public schools and a 5.5 percent boost in direct aid to colleges and universities - while making a down payment on an income-tax cut.

Extolling a "New Jersey comeback," the first-term Republican governor departed from his often confrontational tone in addressing the Democratic-controlled Legislature and offered a spending plan that is the largest since fiscal year 2008, according to the state, and about 8 percent more than the budget he signed last summer.

The state treasurer projects a 7 percent increase in revenue for 2013 with an increasingly healthy economy due to lower unemployment, higher wages, and positive signs from the retail sector.

"Let us continue to be the example for the nation in getting our fiscal house in order, in addressing long-term pension problems, in fixing our schools and in becoming a haven and home for job growth," Christie said during his speech in the Assembly chambers.

Specific appropriations to schools and municipalities will not be available until later this week, but municipal aid is unchanged and most school districts are expected to receive a slight funding boost compared with last year.

The school funds would not fully restore the reductions that Christie implemented when he first assumed office, according to the state School Boards Association.

In one of the more drastic cuts in the spending plan, Camden City government could lose much of the money on which it relies to function. Camden Mayor Dana L. Redd, a Democrat, attended the budget address and said she did not know the implications of the proposed 56 percent cut to the transitional aid program for struggling municipalities.

She did not look surprised, however. The governor has said that transitional aid was meant to be just that - transitional. Redd had a positive appraisal of the governor's speech, saying Christie was "balancing the needs" of the overall population and the most vulnerable.

Legislative Democrats, who have until June 30 to approve the budget, were not nearly as kind. But they refrained from declaring any of its provisions dead on arrival.

They echoed earlier complaints about Christie's plan to cut income taxes by 10 percent over three years, saying the savings would be meaningless to those in the still-struggling middle class.

"For a family making $150,000 in New Jersey - a strong middle-class family - the governor has promised them $70 back in 2013," said Assembly Majority Leader Louis D. Greenwald (D., Camden). "We know that $70 for a middle-class family does not fill the tank of their minivan to carpool their kids . . . and as baseball season begins, it doesn't buy cleats for all three kids."

Christie dismissed the critics, urging them to "end the nay-saying - join us to accelerate the New Jersey comeback this year."

Tax cuts, he said, keep jobs in the state.

Senate President Stephen Sweeney (D., Gloucester) said that argument was false.

"He's protected millionaires the entire time he's been here and our unemployment level is higher than the national average. So when I hear this stuff, how these [tax cuts] are the job creators, then our unemployment rate should be lower than everyone else's," he said.

Though most Democratic lawmakers sat silent during the 40-minute speech, Christie was frequently interrupted by applause - including a sustained ovation from the Republican side of the chamber when he said, "Just so there is no mistake in my intention: I will veto any tax increase again."

It is property tax relief - not income tax relief - that New Jerseyans tell pollsters they really want, Democrats have said. Property-tax-rebate programs received no increase in the proposed budget.

When pressed later, Democrats did not rule out supporting an income-tax cut of some kind. The budget would pay for the first phase of a 10 percent income tax cut with $183 million, but a separate bill would have to be approved by the Democrats to initiate the change in tax rates.

The liberal-leaning New Jersey Policy Perspective slammed the income-tax cut plan with a statement released while the speech was still going on, saying Christie had based his tax cut on "pie-in-the-sky revenue projections" unlikely to happen in a "stagnant economy."

In the first half of fiscal 2012, revenues only rose 3 percent. But in a briefing with reporters before Christie's budget address, Treasurer Andrew Sidamon-Eristoff said, "We believe that the economy of the state is, in fact, experiencing a comeback."

One way Christie found cost savings was by restructuring departments that provide services to vulnerable populations without eliminating funding to those programs, according to budget documents. The Department of Health and Senior Services will drop the "Senior Services" part, as that element would be moved into the Department of Human Services.

The new Department of Health would take charge of all hospital funding, which remains flat in Christie's budget. At the Department of Children and Families, the governor hopes to create a division for children with developmental disabilities.

Some other highlights of the budget proposal:

Christie wants to increase the earned income tax credit for the working poor, for a total average annual benefit of $550, while also providing for $350 million in small business tax cuts.

Of the $213 million in added state aid to public education, $121 million is direct funding for school districts, $14 million is for a program that allows students to attend school out of district, and $15 million is slated for preschools.

Higher education stands to get a 5.5 percent increase - with the biggest percentage hike, 12.8 percent, going to Rowan University. The added funds are not related to the proposed merger of Rowan with Rutgers-Camden - although Christie used his moment in front of the Legislature to push that cause again. He also appropriated $28 million more for tuition assistance and $1 million for a not-yet-created college scholarship program geared toward urban youth.

The Department of Corrections, due to a decrease both in overtime costs and prison population, will see a 2.8 percent - or $30 million - cut in funding. An allocation of $2.5 million is proposed for a mandatory drug court for nonviolent offenders, which is a key part of Christie's crime agenda.

Hagedorn Psychiatric Hospital in Hunterdon County, which is to be closed, would become a facility for homeless veterans.

Christie plans to make - as mandated by a law he championed last year - a $1.1 billion payment into the public-employee pension system. That was the minimum required, about a third less than actuaries recommended, but the biggest single payment in state history.

At the Department of Environmental Protection, Christie seeks to raise spending of state, federal, and other funds by $1.4 million. But some environmentalists complained that $210 million was being taken from the clean-energy fund, used to provide rebates on home weatherization, renewable energy, and energy efficiency. Others praised the governor for increasing aid for state parks.

New funding for individuals with developmental disabilities - $24.7 million - will expand community placements.

Christie used the budget address to push other priorities, particularly his education plans, which have barely moved in the Legislature.

It is unclear if the budget negotiations over the next several months will be more harmonious than they were last year.

After passing Christie's first budget two years ago, Democrats rejected his plan last year and sent him a budget with hundreds of millions of dollars in new spending for schools and the poor. Christie drew the ire of Democrats by taking $900 million out of that proposal before signing it.

This year, the income-tax proposal is likely to cause the most conflict. At the end of his speech on Tuesday, Christie returned to that idea.

"Why not cut income taxes for all New Jerseyans when our fiscal house is now in order?" he asked, setting off a series of rhetorical questions.

"Why not cut income taxes when we are providing for our most vulnerable?"

As Christie shook hands with lawmakers on his way toward the room's exit, he stopped to chat with Geoffrey D'Aries, 27, who suffers from cerebral palsy and uses a wheelchair.

"You made it!" Christie said. "How did I do?"

D'Aries, who attended Christie's State of the State speech last year, assured the governor. "You did very well," he said. "Thank you for inviting me."

D'Aries, of Chester, Morris County, said he would like to work for the governor's campaign team.

"He's very forthright," D'Aries said.

N.J. Budget at a Glance

Overall spending: Spending in Gov. Christie's proposed budget for the year starting July 1 would be $32.1 billion - up 3.7 percent over this year. That amount would be the highest in five years, but nearly $1 billion less than state government spent in the budget year that began July 1, 2007.

Revenue forecast: Revenue from taxes and fees is expected to be up 7.3 percent over the current spending plan. The largest increases would be generated from corporate taxes, and smaller increases from sales taxes and the income tax, which Christie proposes to begin cutting in January 2013.

School aid: The state would contribute $8.9 billion to schools - up 2.5 percent. Details of how much each district will get are expected to be released this week.

Municipal aid: Overall state aid to towns would drop slightly to $1.47 billion, from the current $1.48 billion. Cuts would come in transitional aid that goes to struggling cities, including Camden.

What Christie says: "Let us continue to be the example for the nation in getting our fiscal house in order, in addressing long-term pension problems, in fixing our schools, and becoming a haven and home for job growth."

What Democrats say: Income-tax cuts would help high-earners far more than those in the middle class. They say the focus should be on trimming property taxes.

Source: Associated Press

Gloucester County Times editorial - If revenue is real, N.J. budget's not bad

Published: Wednesday, February 22, 2012, 3:00 AM  By Gloucester County Times Editorial BoardGloucester County Times

Wow! Gov. Chris Christie is proposing to spend more next year. About $2 billion more.

Coming from a governor best known for slashing budgets, the new $32.1 billion spending plan (up 3.7 percent from a year ago) is a bit of a surprise. It may also be an admission of what middle-class and poor households in New Jersey already know: It’s almost impossible to make ends meet by spending the same amount you did in 2009.

Self-styled miracle worker that he is, Christie has sweetened the pot with his 10 percent across-the-board state income tax cut over three years. His 2012-2013 budget calls for implementing the first third.

Are we skeptical? Sure. But give Christie some credit. He didn’t slash school aid, as some legislative Democrats had feared. Higher education aid? Also up. The budget also includes new programs, like innovative drug courts for all 21 counties. And, he admirably plans to make a pension payment of $1.07 billion, denting the huge shortfall.

But municipal aid is essentially flat. That, and the way the extra $213 million in school aid is divvied up, will drive the central question in our state: What will happen to local property taxes, still by far the biggest tax bill most New Jerseyans face?

The fact is, neither Christie nor legislative Democrats who carp about his tax-cutting priorities have offered anything to shift the long-term burden away from property taxes. Remember, the 2 percent cap for which they all pat themselves on the back only limits future increases. And property tax credits (the former rebates) for those who qualify would not be increased in Christie’s budget.

Senate President Stephen Sweeney, D-3, immediately reacted that Christie is “protecting millionaires over everyone else,” but it could be tough for Democrats to deny an income tax break if Christie convinces the public that he’s funded everything else responsibly.

An across-the-board cut, as Democrats note, sends the most to the wealthiest people. It’s fiction for Christie to promote this as middle-class tax relief, when $50,000 earners would see only about $80 a year in their paychecks when it’s all phased in.

Any income tax cut ought to help the middle class more. For the working poor, Christie has proposed increasing the Earned Income Tax Credit by 2014.

Rowan, Rutgers, and other public universities should be relieved that Christie has proposed an aid increase of $108 million, or nearly 6 percent, plus boosts in tuition assistance. By the way, he offered this up with up a commercial for the controversial and possibly rushed plan to integrate the Rutgers-Camden campus into Rowan.

One final note of caution: Christie is trying to pull off his next phase of his New Jersey Comeback with increased revenue projections nearing 7 percent. Gasoline prices are soaring. That could halt any comeback in a way that’s beyond the control of both the governor and the Legislature.

Bloomberg - Christie’s $32.1 Billion Budget Counts on Rising Tax Revenue

By Terrence Dopp - Feb 21, 2012 3:11 PM ETTue Feb 21 20:11:04 GMT 2012

New Jersey Governor Chris Christieproposed a $32.1 billion spending plan, the biggest in five years, that counts on tax revenue increasing the most since before the recession began.

The budget, which is $2.4 billion more than the plan enacted last year, would reduce income and business taxes while making a $1.1 billion pension payment, the highest in state history. It would increase school aid by $213 million and cut funding for distressed cities.

“Today, we will both maintain our fiscal discipline, and drive New Jersey into a new era of growth,” Christie said in a speech to lawmakers. “Today, it is time to put the New Jersey comeback into high gear.”

Christie, a 49-year-old first-term Republican, is calling for a 10 percent income-tax cut over three years. He predicts state revenue will rise 7.3 percent in fiscal 2013, which begins July 1. He has said his tax cuts, which will cost more than $500 million next fiscal year, will spur the economy.

Democrats, who control the Legislature, say Christie’s income-tax cut proposal favors the wealthy and that he should focus on easing the property-tax burden. Christie has accused Democrats of ignoring taxes and job creation while spending the past month on a gay-marriage bill that he vetoed Feb. 18.

Slow Recovery

Rising pension costs and a slow recovery from the longest recession since World War II led Standard & Poor’s, Moody’s Investors Service and Fitch Ratings to lower New Jersey’s credit grade last year. While revenue in the first half of this fiscal year rose 3 percent compared with the same period of 2010, it was $326 million less than targets.

New Jersey’s revenue dropped 11.3 percent in fiscal 2009 as the economy slumped. It fell 3.5 percent the next year, before rising 2.9 percent in 2011, and is projected to rise 3.5 percent this fiscal year. The governor stressed that spending for 2013 remains below fiscal 2008 levels.

“We also have avoided overly optimistic assumptions about revenue,” Christie said. “These will only get us in trouble in the future.”

The $29.7 billion budget Christie signed last year has increased to $31 billion as the administration supplemented spending, in part because the Legislature underfunded some areas, Treasurer Andrew Sidamon-Eristoff told reporters. The plan for fiscal 2013 is 3.7 percent above that figure, he said.

Pension Contribution

Christie’s fiscal 2012 budget funds only 14 percent of the pension payment recommended by actuaries, Fitch said in a Jan. 31 report. Demands will rise if the state misses its 8.25 percent assumed return on investments, the company said.

The pension funds, with $67.2 billion of assets, returned 1.7 percent last year. They have an annualized 10-year return of 5.1 percent, according to treasury reports last month.

The state’s estimated pension-funding deficit fell to $36.3 billion from $53.9 billion after Christie signed bills in June that raised pension and health-care expenses, increased the minimum retirement age for new employees to 65 from 62 and froze cost-of-living increases. The gap then swelled $5.5 billion to $41.8 billion for the 12 months through June after Christie skipped a pension payment.

A 2010 law required the state to phase in full payments over seven years after a decade of lapsed funding. Christie this year budgeted $484 million for a payment. Actuaries recommended the state put in $3 billion.

‘Financial Future’

The liability will continue to grow because of the failure to make full contributions until fiscal 2018, Fitch said. The company rates New Jersey’s general-obligation debt AA-, its fourth-highest grade.

The pension payment represents 3.42 percent of the total budget this year, Christie said in his speech.

“My proposal of $1.1 billion for pensioners in this state reinforces my commitment to the security and financial future of all public workers,” he said. “Stand with me on this commitment. Let us live up to our word.”

Christie said last month that he wanted to boost funding to“shortchanged” middle-class schools. He said his budget would redirect allocations that now send 63 percent of funding to the 31 poorest districts. The state’s highest court last year ordered Christie to increase aid to those systems, known as Abbott districts.

School Plan

New Jersey spends about a third of its budget on public schools, averaging $17,700 a year for each student, and yet 100,000 children are trapped in failing institutions, Christie has said. He has proposed changes to tenure, linking teacher pay to performance and allowing privately funded vouchers for students in poor families.

Christie proposed school aid of $8.8 billion in his budget, which he said is a “record level of investment” by the state.

“The opportunity to get a great education should not be a function of the zip code you live in -- it should be a hallmark of growing up in New Jersey,” Christie said.

Even with the 10 percent income-tax cut, rates in many brackets will be higher than those in New York, Connecticut andPennsylvania, he said.

“We need to reverse our competitive disadvantage,”Christie said. “In the mid-Atlantic region, New Jersey needs to be the best home for growth.”

Democrats say a family with a $50,000 annual income would pay $80 less in taxes under Christie’s plan, while someone earning $1 million would save $7,200.

While 52 percent of registered voters support the income-tax cut, 76 percent would prefer reducing property taxes first, according to a Rutgers-Eagleton poll released today. New Jersey’s property taxes, the highest in the nation, rose 2.4 percent on average to $7,759 in 2011, according to state data.

Voters overestimate how much money they would receive from Christie’s tax cut, the poll found. Thirty-five percent think a 10 percent tax cut would save them more than $500, while a household would have to earn more than $150,000 to save that much. Only 14 percent of voters report incomes over $150,000.

To contact the reporter on this story: Terrence Dopp in Trenton at tdopp@bloomberg.net

To contact the editor responsible for this story: William Glasgall at wglasgall@bloomberg.net