TRENTON — Gov. Chris Christie's final state budget includes a record-high pension payment, some increased funding for drug treatment and medical schools, but it doesn't call for any drastic changes in school funding.

At least not yet.

The Republican governor unveiled the proposed $35.5 billion spending plan Tuesday afternoon in an address to the Democratic-controlled Legislature where he repeatedly stressed that actions undertaken by his administration during the last seven years have left the state in a much better state financially than what he inherited when he first assumed the office.

He cited cutbacks in the number of state government employees, boosted business incentives, public employee pension and health benefit reform, the introduction of a 2-percent cap on local tax levy increases and last year's transportation funding deal, which raised the state's gas tax a whopping 23 cents but reauthorized the government's Transportation Trust Fund and reduced several other taxes.

"Trenton will be a much more welcoming fiscal climate for the next governor in 2018," Christie said. "We have slayed the ghosts of fiscal irresponsibility that haunted this house in 2010. We have established a new baseline for government."

He said his proposed fiscal year 2018 budget builds on the progress. The proposal calls for a $1 billion increase in spending, and relies on 3.6 percent growth in tax revenues and other fees.

More than half the increase in spending is the result of the state's planned $2.5 billion pension payment — a record amount that is $647 million more than the current fiscal year.

The sum is still half of what actuaries have calculated the state must pay in order to keep the pension system solvent for future retirees, and Christie warned that the increasing pension payments were more than the state can afford and were crowding out other budget priorities.

He said more reforms are needed. And while his budget plan assumes only about $125 million in savings from health benefit changes, Christie floated a potential new idea for pension reform: redirecting revenues from the state lottery toward the pension system.

"The contribution would have the immediate effect of reducing the unfunded liability of the pension system by approximately $13 billion," Christie said, adding that doing so would significantly reduce the state's annual payment.

He did not specify how the state would fund many of the other state programs the lottery funds now.

Democratic lawmakers expressed some initial doubts about the idea, but did not dismiss it outright.

"It could be a good idea or a bad idea, we really need to see the revenues," Senate President Stephen Sweeney, D-3rd of West Deptford, said after the speech.

Likewise, lawmakers also said they would reserve judgement on another Christie proposal to use some of the Horizon Blue Cross Blue Shield of New Jersey's $2.9 billion surplus to create a permanent fund to support in-patient and out-patient drug treatment for low-income patients who lack insurance coverage for treatment.

The proposal is not built into the budget, but Christie called on Horizon and lawmakers to negotiate an agreement for the fund, saying the nonprofit insurer has an obligation to the state's residents.

"As the sole insurer with this unique nonprofit status and historically charitable mission, Horizon shares in the financial obligation of caring for our most vulnerable citizens and can set aside in this fund excess surplus monies and other revenue to support our efforts to beat this disease," he said.

In a statement, Horizon said raiding the company's reserves would "only make insurance more expensive and less secure."

"Instead of taking our members’ reserves, we should partner to create a permanent and stable source of revenue to help New Jersey’s less fortunate by tackling, once and for all, the $1 billion dollar out-of-network billing abuse and surprise medical billing problem," the statement said.

Lawmakers have been trying to tackle the issue of out-of-network "surprise" billing by hospitals and other providers for several years without success. In his speech, Christie briefly mentioned the issue, saying the $125 million in public employee health benefit savings anticipates some legislative action on the issue.

Prior to Christie's address, the biggest question surrounding the proposal was what, if any, changes he would propose to how the state distributes billions in aid to New Jersey's 586 public school districts.

Christie's budget calls for only a small increase in overall education funding and included no major change in the way the funding is distributed.

No school district will lose aid under Christie's proposal, which essentially maintains the status quo in the school funding debate rather than implementing the so-called "Fairness Formula" that Christie put forward last summer.

That plan proposed scrapping the state's 2008 school funding formula and redistributing the roughly $9 billion in aid based on a flat — $6,599 per pupil — amount for every district, regardless of their populations of poor and special needs children.

The proposed change would boost aid significantly to many suburban districts, including many that have been shortchanged in recent years. But it also would cause massive reductions for many urban and poor districts that have received large amounts of aid over the last 30 years.

It never gained any traction with Democratic leaders, who have proposed less drastic changes to the existing funding formula in order to try to correct funding disparities. The New Jersey Supreme Court also rejected a petition from his administration to reopen the landmark Abbott vs. Burke school funding case in order to make formula changes.

While Christie did not propose any changes in his budget, he did challenge lawmakers to devise a school funding overhaul.

"We have 100 days to get this done. No phony task forces. No blue ribbon commissions. No delays until next year. We get in a room and you get this done with me, for the families of this state, in the next 100 days. It took you 10 days to pass this failed formula in 2008. Let’s take 100 days to pass one that is fair for all New Jersey students in 2017," he said.

Democratic lawmakers said they were encouraged Christie appeared to abandon his own funding formula idea, but they stressed that the existing formula might be tweaked but would largely remain intact.

"It's not a disaster. It works. But it needs to be funded," Sweeney said.

Noting that legislators already have held several hearings on the issue of school funding, Assemblymen Troy Singleton, D-7th of Palmyra, expressed optimism that an agreement could be reached in time.

"The governor laid down the challenge and the charge today. The good thing is those of us in the Assembly and the Senate have already done a lot of work to try to come to that conclusion of what that looks like, so I'm hopeful that in the next 100 days we'll be able to do that," Singleton said.

Assemblyman Herb Conaway, D-7th of Delran, said he also was open to devising a school funding fix, but he stressed that the central idea behind the existing formula — that education funding should be based on student needs — should remain intact and that suburban and urban districts should not be pitted against each other.

"Education is for everyone and funding should be based on a child's needs," Conaway said.

Republican lawmakers called for bipartisan cooperation to advance the governor's proposals.

"Sometimes it's the things outside the box that actually are successful. The only thing we can do at this point is work together to try to achieve these goals, because they are good goals for everyone," Sen. Dawn Marie Addiego, R-8th of Evesham said after the speech. "Both sides of the aisles have always been willing to work together and I think these are great initiatives to work on in his final year."

"He's not sitting back and being a lame duck," Assemblyman Joe Howarth, R-8th of Evesham, added. "He's going out doing what he really feels we should be doing. I think the challenges he gave everybody, I think it behooves people to get together and try to get things done."

In addition to school funding, Christie's budget again keeps state aid to municipalities flat and makes no changes to the state's property tax relief programs, such as the Homestead property tax credit and senior freeze.

The spending plan includes some increases in funding for drug treatment, as well as medical schools, but cuts funding for hospital charity care by $25 million.

Christie and his treasurer said the reduction reflects gains the state has made in reducing the number of uninsured residents living in the state through the expansion of Medicaid under the Affordable Care Act.

President Donald Trump and the Republican-controlled Congress have called for repealing the Obama administration's signature law and replacing it with some other form of health care reform. Christie's budget assumes the law's Medicaid expansion will remain intact through the next fiscal year beginning in July and running through June 2018.

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