Christie's Last Budget Offers Few Surprises, But May Seek Final Compromise

TRENTON — Weeks ago, Gov. Chris Christie hinted on his monthly radio show that his eighth and final state budget proposal likely would contain no surprises.

He wasn’t fibbing.

The $35.5 billion spending plan he unveiled Tuesday appears to be mostly nuts and bolts maintenance with no new tax increases or cuts, and a modest $1 billion increase in spending mostly the result of a $650 million increase to the state’s public employee pension payment. Aid for schools, towns and property tax relief programs are proposed to remain mostly flat.

But while the spending plan itself proved uncontroversial, Christie’s address to the state Legislature contained a few unexpected propositions, including a new proposal to use lottery revenues to shore up the state’s beleaguered public employee pension system and a challenge for lawmakers to send him a revamped school funding formula within the next 100 days.

Here are some takeaways from the governor’s final budget address:

Christie wants to compromise

Some might argue that Christie never has been weaker. He’s in his final year of office and his approval ratings are hovering at historic lows. In fact, the biggest consensus among the candidates running to succeed him is that the state needs new leadership.

With that as the backdrop, Christie appears to be seeking at least one final compromise with Democratic lawmakers.

“I think he’s looking for the last big win as he’s finishing his last term,” said Sharon Schulman, director of the Hughes Center for Public Policy at Stockton University.

Whether it can happen remains to be seen, although Christie’s legacy mostly is built on such compromises, including his first-term, tax-levy cap and public employee benefit reforms, and last year’s controversial transportation funding law, which raised the state's gas tax 23 cents to replenish the Transportation Trust Fund while cutting several other taxes.

Christie would love nothing more than to make school funding or pension reform his final curtain call, perhaps even both.

On school funding, he essentially abandoned his own proposal to scrap the existing school funding formula and redistribute school aid based on a flat — $6,599 per pupil — amount for every district, regardless of their populations of poor and special needs children. Instead, he’s calling on legislative leaders to send him a new formula that corrects funding discrepancies plaguing hundreds of districts.

Tellingly, his budget does not put forth a preferred fix. Doing so would have forced school districts to craft their own budgets based on the aid he proposed and sparked a major confrontation with the Democrats in the Legislature.

Instead, Christie’s budget maintains the status quo — school aid will remain mostly flat with no districts losing aid — while leaving the door open to a compromise on changes within the next several months.

Likewise on pensions, Christie’s budget makes the larger $2.5 billion payment into the public employee pension system, without committing to his new idea of using lottery revenues to help shore up the underfunded system.

Lots of questions

The lottery proposal was easily the biggest surprise. It was also the issue lawmakers were most unsure of afterwards.

“At this point, there seems to be more questions than there seems to be answers,” Assemblyman Gary Schaer, D-36th of Passaic, said about the proposal.

During his speech, Christie said transferring revenues from the lottery could immediately increase the funded ratio of the pension system from 49 percent to 64 percent and reduce the amount the state is supposed to contribute to the system every year out of the general fund budget.

Lawmakers responded that they were unclear if the idea was constitutional given that the lottery was created via a constitutional amendment and its close to $1 billion in revenues are now dedicated to “state institutions and state aid for education.”

Also left unclear is what would happen to the state programs lottery proceeds now support, such as tuition aid grants and services for the developmentally disabled and veterans.

“The idea is intriguing, but the lottery funds an enormous amount of programs in state government," Assemblyman Troy Singleton, D-7th of Palmyra, said Tuesday after Christie's speech. "So if you’re going to take those resources away, the question is where do those resources go and how do you backfill those?”

Lawmakers also questioned what Christie meant when he said he would “act alone” if the Legislature fails to negotiate a suitable compromise on school funding.

“Please be assured that if we do not do this in the next 100 days together, each branch will then be left to its own authority and its own devices to fix this problem on its own,” Christie said. “I want to act with you. But, if forced, I will act alone. But it will be fixed before I leave this town.”

Democrats responded that they aren't interested in rewriting the funding formula completely but are focused on making less drastic tweaks to correct discrepancies. And while Christie enjoys substantial power as governor, including the authority to line-item veto out any spending and language in the final adopted budget, lawmakers warned that any drastic changes could land the state in court as poor schools would petition the Supreme Court to ensure they are properly funded.

Spotlight on surprise medical bills

Last year, Christie proposed a budget that anticipated some $250 million in savings from changes to the public employee health benefits. And while it took a fair amount of arm-twisting and negotiating (the state’s longstanding reciprocal tax agreement with Pennsylvania was nearly a casualty), the savings were eventually realized.

Christie took a similar approach in his final budget proposal, which banks on another $125 million in health care savings.

Among the changes the governor wants is legislative action to address the surprise medical bills patients receive if they get care or treatment at a hospital or from a doctor who doesn't participate in their insurer's network and won't accept an insurer's reimbursement as full payment.

In some cases, patients will go to an in-network hospital but still receive a large bill because a specialist, such as a radiologist or anesthesiologist, who assisted in their care was not part of their insurance network.

Legislation to try to address these bills has been debated in Trenton for close to eight years without success.

Christie said his budget recognizes savings for a “reasonable transparency solution to out-of-network surprise billing.”

Horizon Blue Cross Blue Shield of New Jersey also called for the government to tackle the issue rather than follow through on Christie’s call for the insurer to use a portion of its $2.9 billion surplus to help fund drug addiction treatment.

Singleton welcomed the attention to the issue.

“I’ve been working passionately on this issue for the better part of my entire tenure as a legislator,” he said. “It’s something I want to see happen and to hear the governor acknowledge it publicly is a good start."

Towns get no additional aid again

The governor’s budget proposal essentially keeps aid to New Jersey municipalities flat again, continuing a trend that has drawn scorn from mayors in the past.

The last time most municipalities saw a significant aid increase was in 2007, and mayors have frequently complained that the state is misusing close $1 billion in revenues collected annually from utility and energy in lieu of property taxes.

Mayors claim the revenues, called energy tax receipts, are supposed to be returned to their communities as part of their annual state aid, but that the state continues to divert large sums to the state’s general fund in order to balance the budget at the expense of towns and property taxpayers.

The issue is raised annually by mayors and officials from the New Jersey League of Municipalities during the state’s budget hearings, but Christie steadfastly has resisted boosting aid to towns.

Instead, Christie and his treasurer reiterated their call for public employee health benefit changes, arguing that they would yield substantial savings to the state, as well as towns, schools and rank-and-file employees.

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