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Will Christie offer pension, transportation fixes in coming budget?

Tuesday, February 24, 2015   (0 Comments)
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NJ.com 02/23/15

On Tueday, Gov. Chris Christie will go before the state Legislature and present a budget with repercussions for his own presidential ambitions and New Jersey's financial fitness. Both are in the grips of ailing infrastructure and pension systems that are expected to dominate the upcoming budget process. Endorsing an unpopular gas tax increase to pay for road and rail projects won't help Christie with conservative voters on the national stage, but as one labor leader said earlier this month, failing to replenish the state's nearly broke Transportation Trust Fund would be tantamount to committing economic suicide. And allowing the state's fourth-worst-in-the-nation pension system to slip further would undercut his ability to showcase on the national stage a 2011 bipartisan pension reform deal that was supposed to save the system.

The estate tax has become a bargaining chip as Democrats look to convince Republicans to sign on to an increase in the gas tax to raise new transportation money. State Assembly Minority Leader Jon Bramnick (R-Union), a Christie ally, said his Republican colleagues would consider hiking the gas tax if it was coupled with the repeal or reduction in the estate or inheritance taxes, which are considered among the most crushing in the nation. In that time, the state's revenues will come into focus and the pension landscape could also change considerably. Christie's pension commission is expected to soon release a much-anticipated plan for reigning in retirement costs, including pensions and health care. The state is facing a $37 billion unfunded liability for its public worker pension system and $53 billion in unfunded health care liabilities.

Christie's administration won the first round of that battle with the unions, but Superior Court Judge Mary Jacobson has not ruled whether Christie can slice $1.5 billion from the payment for the fiscal year that began last July 1. Marc Pfeiffer, assistant director of Rutgers' Bloustein Local Government Research Center, said pensions must be part of the budget solution. "I think there's an obligation to present something as part of the budget," Pfeiffer said. While speaking before business leaders, lobbyists and lawmakers in Washington on Thursday, Christie said pension costs threaten to crowd out "every other type of spending."

MacInnes said he doesn't expect tax collections to come to the rescue. New Jersey's lagging economy is expected to put a stranglehold on the state's revenues, experts say. "Any idea that (revenue growth) is going to be much above 5 percent -- with much of that being in the income tax, because that's the one tax that has done pretty well coming out of the Recession ­­-- I don't see that happening," MacInnes said. The state's revenues from July through December were ahead of estimates, according to a January treasurer's report. Tax collections were up 7.2 percent, compared with a 5.2 percent projected growth rate in the current budget.

There's a chance that revenue from capital gains could provide a pleasant surprise, because the state budget gets a boost whenever the stock market booms. "On one hand, the lagging job growth is certainly inhibiting what the full revenue growth potential is," Hughes said. "On the other hand, a good share of [New Jersey's gross income tax] is paid for by very high-wealth individuals. We could be in for a windfall because the stock market is at stratospheric levels." Putting aside negotiations over an increased gas tax, Michele Siekerka, president of the New Jersey Business and Industry Association, said she wouldn't expect any talk from Christie about new sources of revenue.


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