Christie's team eyes budget cut up to 25%

TRENTON - Gov.-elect Christopher J. Christie's transition team is eyeing state budget cuts of up to 25 percent as it grapples with a slew of fiscal problems, including a deficit that could exceed $8 billion.

In a memo sent yesterday, current cabinet members were instructed to draw up plans for spending cuts of 15, 20, and 25 percent, though some programs were left off limits.

Members of the transition team also have said that they were considering scaling back eligibility for some government programs, potentially including Medicaid and other health-care programs, to bring New Jersey's regulations more into line with those in surrounding states. In addition, Christie's aides are looking at ways to trim state employee benefits, according to a high-ranking member of the transition team.

The cuts requested in the memo, which are due Jan. 6, would be for the 2010-11 budget Christie is to propose in March. They are on top of $839 million in reductions Gov. Corzine outlined yesterday to deal with shortfalls in the state's current $28.6 billion fiscal plan.

Christie's top budget advisers have signaled that the state's financial problems are so severe that steps once considered unthinkable may be necessary.

"This is probably the time, when Gov. Christie takes office, to have a serious conversation about long-term reform," Robert Grady, a cochairman of Christie's budget task force, said recently. "Reform that will put the state on better footing."

Aides are analyzing the budget plan to "engage in a real prioritization of what is essential, as opposed to things that are merely desirable but cannot be afforded," said Richard Bagger, the task force's other cochair and Christie's incoming chief of staff.

That task was reflected in the memo to cabinet leaders. It came from Corzine's Treasury Department but was sent at the request of Christie's team.

"The current situation requires the state to review its operations, to determine which functions should continue and which no longer are necessary," the memo said.

In recent years, budgets have been cut, but often with trims that have left programs in place. Christie has signaled that he is looking for more definitive change.

He is inheriting an $8 billion budget shortfall and $33.9 billion in debt as well as a transportation fund near bankruptcy and a badly underfunded pension system. The state's unemployment fund, battered by years of raids and soaring benefit claims, is facing its own deficit and could trigger a tax increase on businesses next year.

Amid these problems, Christie successfully pushed Corzine to roll back a tax on the wealthy that yielded $900 million annually. A central plank in Christie's campaign platform was his argument that the state had become too expensive, chasing off residents and businesses.

"Revenue enhancements" - the bureaucratic term for tax increases - "will not be considered at this time," yesterday's memo said.

Democrats, who control the Legislature and thus will have a big say on the budget, are with Christie on his fiscal approach, to a point.

"The results have the potential to be horrific, but these are not ordinary times, and I don't think there is an alternative other than watching us slip deeper into the red," said Senate Budget Chair Barbara Buono (D., Middlesex), who will soon become Senate majority leader.

She added that budget cuts must be balanced with the needs of residents already hit by the national recession, however.

"There will be a difference of opinion when it comes to cutting some valuable services that people have come to rely on," Buono said. Pointing to Christie's request that Corzine not extend tax increases on incomes of $400,000 and up, Buono said, "This will be a point where we will differ."

Assembly Budget Chair Louis D. Greenwald (D., Camden) said that Democrats already had started to cut the budget and that he supported changes to make government "live within our means."

He stressed that budget cuts should not affect property taxes, a potential result if aid to towns and schools is reduced. Greenwald further argued that if an income-tax cut for the wealthy were seen as an economic stimulus, then perhaps a cut for others also would provide a benefit.

"The wealthiest 1 percent can only buy so many washers and driers," Greenwald said. The rest of the state is "also feeling the pinch."

New Jersey governors have warned of budget shortfalls for years. They have promised reforms and tough decisions, yet deficits have continued.

As early as 2005, then-Gov. Richard J. Codey famously told lawmakers "The good news is, we're not bankrupt. The bad news is, we're close."

Corzine sought ideas for cuts of up to 15 percent in his first budget in 2006, and last year asked cabinet officials for reductions of up to 20 percent.

But such memos only target a portion of the budget. Because some programs are not being reviewed by the cabinet, the cuts Christie requested yesterday would trim at most $2.7 billion, according to a source close to the budget.

That would leave Christie with billions more in savings to find. State operations cost roughly $4.2 billion, so eliminating every aspect of overhead would cover only half the budget gap.

Some easy answers may be available for the short term - skipping pension payments, borrowing more, finding the last of the trust fund surpluses to raid - but such steps, which have contributed to the state's current problems, would make the state's long-term budget issues more grim.

With Christie taking tax increases off the table, lasting, systemic repairs likely will have to come through significant spending cuts and will be accompanied by political battles.

When it comes to Medicaid, for example, New Jersey Democrats take pride in having expanded health coverage for the needy. Reducing employee benefits would require a battle with labor unions and possibly challenging a "no layoffs" pledge Corzine agreed to last year.

Christie has months before he has to lay out his plans formally. He has said he would introduce his budget proposal on March 16, and the spending plan must be signed by June 30.

Christie has yet to name a state treasurer, though four Republicans familiar with the search said Grady was the top choice. Questions remain, however, over whether he would want to move his family from Wyoming, according to the GOP sources.

Whoever lands the job will take on what is sure to be one of the prime challenges of Christie's tenure. Anger at New Jersey's high taxes and fiscal futility played a large role in his Election Day victory.

Christie's initial budget will be a measure of how far he is willing to go to deliver the change he promised.