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Christie slashes tax hikes, signs $33.7B budget

Friday, June 26, 2015   (0 Comments)
Share | 06/26/15

Governor Christie signed what he said was a $33.7 billion budget on Friday, cutting $1.6 billion in spending that state Democrats had proposed and a pair of tax increases on businesses and millionaires. The governor did not provide the budget documents, the total cost, or a breakdown of his line-item vetoes reducing spending. Those details would be available later in the day, Christie said.  With Christie’s signature, the budget is set to take effect Wednesday. At $33.7 billion, the spending plan would be 3.7 percent larger than the one he signed last year, and about $100 million smaller than the budget draft Christie presented in February. For the third year in a row, the budget includes a payment to New Jersey’s distressed pension system for public workers that covers the retirement costs only of employees currently in the workforce. That $1.3 billion payment, however, would not reduce the pension funds’ accumulated unfunded liabilities of $40 billion, a legacy of previous governors and legislators – and Christie himself, who has skipped or failed to make the full actuarially required payments since taking office.

The three major Wall Street credit-rating agencies – Fitch Ratings, Moody’s and Standard & Poor’s – have each downgraded New Jersey’s general-obligation bonds because of the pension-funding crisis and the lack of progress in the state house. “Governor Christie's policies have once again dug New Jersey deeper and deeper into fiscal crisis,” said Assemblyman Gary Schaer, the Democratic chairman of the Assembly Budget Committee. “His budget implausibly puts the state deeper into debt, negatively affects our state's future economic growth and causes even more credit rating downgrades and greater interest charges to be paid by New Jerseyans.” Christie said that if the state ends up making the $1.3 billion contribution when it comes due next June, he will have paid more into the pension system than any previous governor, or $4.4 billion. If union leaders wanted to save the pension system for their members, they should agree to more benefit cuts in a new round of negotiations, Christie said.

Asked to address criticism that the budget did not include sufficient funds for transportation needs or the state’s Transportation Trust Fund, Christie said that would not make sense because the TTF is not funded through the budget, but by a gas tax, and quickly moved on to the next question. However, the governor in 2011 proposed a five-year capital plan that dedicated increasing budget payments to the TTF to wean it off its high reliance on debt. He discontinued those payments halfway into this five-year plan. Democrats and commuter groups say the TTF is about to hit a ditch; its ability to borrow money runs out in a year and no other plans have been proposed to fund road projects, repair decaying bridges, or renew the TTF’s borrowing authority. The governor has declined to consider raising the gas tax.

Christie vetoed a one-year, 15 percent surcharge on New Jersey’s corporation business tax, which would have raised $435 million in revenue. For the fifth time in six years, Christie also vetoed a bill raising the top income tax rate on earnings above $1 million, from 8.97 percent to 10.75 percent. But in a new twist, the veto was conditional, and he returned it to the Legislature with something Democrats have wanted for years – a restoration of the Earned Income Tax Credit for people who have jobs but still live at the poverty line. Michael Egenton, senior vice president of the state Chamber of Commerce, welcomed Christie’s vetoes. “When taxes are increased, we see businesses and business owners consider their options, and many ultimately decide not to relocate or expand in our state,” Egenton said. Christie pointed to Mercedes-Benz USA’s decision to leave New Jersey for Georgia because of high taxes earlier this year, blasting Democrats for trying to raise them further.

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