Millionaires and retired public workers wind up in the win column, but current public workers, businesses, and homeowners rack up a loss with overall spending going up by less than 3 percent, there isn’t much extra money to spread around in the new, $34.5 billion state budget that Gov. Chris Christie signed into law late last week.
Despite that modest growth, a closer look at the new budget reveals there are some who have reason to celebrate. They include retired public workers, thanks to a boost in funding for the public-employee pension system, although it is still deep in debt.
But businesses and homeowners, didn’t fare so well. Christie used the line-item veto to remove nearly $300 million from the spending bill that was sent to him by Democrats who control the Legislature. Other cuts date back to Christie’s original budget proposal from February.
Here’s a closer look at those who emerged as winners, as well as those who ended up losers, in the final version of the budget, which will be in place until June 30, 2017.
Retired public workers – Much of the increased spending authorized by Christie for the 2017 fiscal year will be earmarked for the state’s grossly underfunded public-employee pension system, pushing the pension contribution up to $1.86 billion. That’s a record-setting amount. And though the figure is less than the full payment calculated by actuaries, Christie was able to keep the increased pension payment in the budget even after the state dealt with a $1 billion revenue shortfall in late May. That will make it harder for him to question the affordability of a proposed constitutional amendment calling for similar annual pension-contribution increases that’s likely to go before voters this fall.
Millionaires – There have been five attempts in recent years to increase the state’s income-tax rate on earnings over $1 million, and Christie met each one with an immediate veto. This year, a bill seeking to establish a millionaire’s tax never got off the ground. And it could soon become an even better year for the state’s millionaires. As lawmakers remain deadlocked on the best way to renew state funding for transportation projects, a proposed estate tax cut that would benefit the state’s wealthiest residents still remains very much on the table.
Substance-abuse patients – Christie continues to emphasize the need to boost state funding for programs that seek to help those suffering with drug and alcohol addictions. After ramping up money for drug courts in the prior budget as part of an effort to reduce automatic incarcerations, this year Christie has championed an expansion of substance-abuse and behavioral-health services that will total $127 million, counting state and federal funds.
Young golfers in Essex County – Among the smaller items that didn’t make it past Christie’s veto pen was $5 million that Democrats wanted to train more local health officials about the mosquito-borne Zika virus. A $2 million item for cancer research was also lopped in half. But $3 million in state aid for the First Tee Program, which helps teach the game of golf to youth in Essex County, survived Christie -- though with a special twist this year. Christie is initially holding back these funds and some other legislative add-ons until his administration and public-worker union representatives agree on $250 million in healthcare-cost reductions.
Assembly Budget Chair Gary Schaer – While there were some testy moments and even a shouting match this year in the Senate Budget and Appropriations Committee, in contrast, the Assembly Budget Committee’s leader drew praise from both sides of the aisle for regularly running budget hearings on schedule, and keeping the discussions substantive and fair. There were certainly disagreements and pointed questions along the way, but Schaer (D-Passaic) set a high bar by maintaining a respectful environment.
Current public workers – While they can take some solace in seeing Christie and lawmakers agree to boost the funding for the pension system, the budget as enacted also banks on $250 million in undefined savings from employee healthcare plans that now have to be worked out between union officials and the administration. To add pressure, Christie says he will hold back funding for distressed cities and legislative add-ons until the savings materialize. Also, a proposed sales-tax cut that the Assembly passed last week in a broader plan to replenish the state’s Transportation Trust Fund with a 23-cent gas-tax hike should give public workers more cause for concern. The sales-tax cut could take away so much revenue from the budget in coming years that more drastic healthcare changes may become inevitable.
Businesses – More than 250 New Jersey companies are owed tax credits from the state through its Business Employment Incentive Program, but when the $1 billion shortfall hit in May, one of the solutions to the problem was to delay the full redemption schedule for the credits. The change saves the state, but costs the businesses, more than $100 million. And adding insult to the injury, these credits were originally supposed to be offered as direct grants, but were changed to a credit format during the Great Recession as revenue grew scarce.
Homeowners – Property taxes continue to rise, but thanks to language that was again inserted into the budget affecting the Homestead benefit program, the state will continue to calculate tax credits using outdated bills from 2006. The budget language impacts approximately 650,000 homeowners making $75,000 or less. Also taking a hit are many seniors and disabled homeowners who qualify for Senior Freeze, another popular property-tax relief program. Language seeking to restore inflationary adjustments to the program’s income ceiling was removed at the last minute by Christie, along with a $45 million boost in funding. That means the program’s income ceiling will remain at $70,000 instead of rising to $87,007.
Local governments – Whether it’s mayors or school-board chairs, local-government leaders will argue that flat state funding is really a cut, since their own costs continue to go up each year. The new state budget year increases aid to local school districts and municipalities only slightly. Adding to the hit is uncertainty about state aid for local road and bridge projects that will only build as the transportation-funding stalemate continues into July. And thanks to Christie’s call for $250 million in employee-healthcare savings, some aid for distressed cities is being held back until a deal is reached.
Hospitals – Another measure that was taken to help close the $1 billion shortfall in May was a $25 million reduction in charity-care funding for 72 hospitals who use the money to help cover services for the uninsured. That cut also triggered the loss of $25 million in matching federal funds. Christie also vetoed nearly $10 million in supplemental appropriations for two specific hospitals: Newark’s Beth Israel and Trenton’s St. Francis Medical Center.
South Jersey residents who work in Pennsylvania – Added to the bottom of an executive order that Christie put forward along with the new budget were instructions to the Department of Treasury and attorney general’s office to look into ending a reciprocal income-tax agreement between New Jersey and Pennsylvania that by some estimates costs the Garden State $180 million in annual revenue. If the deal is eventually upended, it would be residents of New Jersey who work in Pennsylvania who would likely pick up the slack in the form of an income-tax increase.
Too soon to tell
Senators Paul Sarlo and Steve Oroho – Competing with the proposal to cut the sales tax is a bipartisan initiative to renew the TTF by hiking the gas tax and phasing out the estate tax. That plan, sponsored by Sarlo (D-Bergen) and Oroho (R-Sussex), would also lift state income-tax exemptions for sources of retirement income like pensions and 401(k) plans; increase the Earned Income Tax Credit for low-wage workers; and establish a new state income-tax deduction for charitable contributions. The Sarlo-Oroho plan has won support from business-lobbying groups and construction-worker unions, and though the Assembly passed the sales-tax cut, the upper house is still committed to the senators’ version. It remains to be seen how the deadlock will ultimately be resolved.