| MAY 29, 2014

The governor’s reliance on wishful thinking when it comes to the budget finally comes up against reality.

Being governor is all about having options, settling on a course of action, marshaling legislative and public support, and then implementing it smoothly and effectively.

From time to time, though, issues arise for which none of the available options is particularly appealing or without considerable risk. The choice is narrowed to selecting the one that is the least distasteful.

This is where Gov. Chris Christie is at the moment.

The state budget is more than $800 million in the red; he faces a legislative revolt and two court challenges to his plan to dramatically reduce contributions to the public pension system; the state’s credit rating has been cut six times, and the outlook for 2015 is equally gloomy.

Moreover, he’s deferred the homestead rebate program until next year, the equivalent of a $375 million property tax increase on the seniors and disabled eligible for the credit. The rebate program has been skipped in three of the five years Christie’s held office.

The shortfalls are the product of successive budgets built upon wishful thinking rather than hard fact. The administration based its proposed spending on revenue growth of between five percent and seven percent, despite repeated warnings that the state’s economy — while recovering — remained too weak to sustain such optimistic forecasts.

As the gaps between income and spending developed toward the conclusion of each fiscal year, they were bridged by fund transfers, shifting money from dedicated programs, or delaying expenditures until the following fiscal year.

The effect of these last-minute manipulations was to create a rolling structural deficit from one year to the next, putting off an eventual day of reckoning when the shortfall reached a level too great to be overcome by bookkeeping sleight of hand.

The Legislature is hardly an entirely innocent bystander in this drama. Despite hearing the same warnings Christie heard — including from its own budget research office — the Legislature accepted the governor’s glowing revenue estimates and the spending that went along with them.

The Democrats recent indignation over the governor’s inclusion of some $32 million in tax and fee increases was short of genuine as well, since both they and the media were told of the plan in a treasurer’s budget briefing in February.

The sheer size of the impending deficit left Christie with no option but to reduce by $2.27 billion the state’s contribution to the public pension system this year and next. His opposition to any sort of broad-based tax increase and his promise to veto one should the Legislature approve it left the pension payment as the only source of readily available funds sufficient to cover the shortfall.

The reaction of the Democratic legislative leadership was predictable — outrage, accusations that the governor was in violation of the law, and warnings that the state’s credit rating would be downgraded yet again.

Senate President Steve Sweeney who earlier this year threatened to refuse to act on the budget and shut down state government if the pension payment was not made in full didn’t repeat it, but said instead he would pursue reinstatement of a surcharge on incomes above $500,000 – the so-called millionaire’s tax — something Christie has vetoed twice.

It’s not likely that Sweeney will follow through on a government shutdown. Democrats are leery of being blamed for denying essential state services to taxpayers to prove their point that shoring up the pension plan for public employees is more important.

In the ensuing public relations war, Christie would seize the high ground, insisting his plan addressed the budget shortfall and protected against a tax increase while Democrats, on the other hand, were willing to punish taxpayers in the interest of appeasing its public employee union base. He would argue, with validity, that the shutdown was initiated by the Democrats in a brazen move to gain political advantage.

The more likely Democratic strategy would be enacting the tax surcharge on wealthy earners, include the revenue in the pending budget, restore the cut in the pension payment, and send it to Christie’s desk.

As anticipated, the governor would veto the surcharge legislation, use his line-item veto to strike the revenue from the budget, and proceed with the reduced pension payment.

Democrats are short of the required votes to override a veto, but will settle for a “lose the battle, win the war” outcome, one which they believe will support their argument that the governor is more sensitive to the desires of the wealthy than the middle class.

They’ll point out that a modest increase in the tax rate for upper-income earners has consistently enjoyed overwhelming public support and that Christie, by his steadfast opposition, has turned his back on the majority of taxpayers while clinging to the discredited notion that the wealthy will flee the state in great numbers if faced with a tax increase.

Christie’s resolute opposition to any tax increase, including raising the gasoline tax to replenish the soon-to be-bankrupt Transportation Trust Fund, guarantees that in the end he’ll prevail. His line-item veto and the Democrats’ inability to override it ensures he’ll succeed.

The New Jersey Education Association and the Communications Workers of America have challenged Christie’s pension reduction in court, alleging that his action violates a 2010 law that locked the state into a specific payment timetable. How and how long the litigation will take to play out is anyone’s guess.

Of the options at his disposal, Christie chose the one he felt posed the lowest political risk. For instance, should he decide to seek the Republican presidential nomination in 2016, he can do so as someone who refused to raise taxes while reining in the burgeoning cost of public employee benefits — conservative credentials all.

His candidacy would still confront questions about his fiscal stewardship, the lagging pace of job creation and economic growth, and the state’s creditworthiness being near the bottom in national standings. Like all his predecessors, Christie enjoys a wide array of options to address problems. Nowhere in the oath of office, though, does it mention they’ll all be good ones.

Carl Golden is a senior contributing analyst with the William J. Hughes Center for Public Policy at the Richard Stockton College of New Jersey.


Leave a Reply

Your email address will not be published. Required fields are marked *