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Christie presents a tough budget

TRENTON - Gov. Christie proposed a budget yesterday that he said would chart a "historic new course" for New Jersey by sharply reducing spending and holding down taxes, doing so by cutting deeply into state programs for the needy and suspending property-tax rebates for 2010.

Gov. Christie delivers his budget address on Tuesday. ( Tom Gralish / Staff Photographer )
Gov. Christie delivers his budget address on Tuesday. ( Tom Gralish / Staff Photographer )Read more

TRENTON - Gov. Christie proposed a budget yesterday that he said would chart a "historic new course" for New Jersey by sharply reducing spending and holding down taxes, doing so by cutting deeply into state programs for the needy and suspending property-tax rebates for 2010.

Christie framed the $29.3 billion plan, his first full budget proposal, as a blueprint of "shared sacrifice" needed to rein in the finances of a state with soaring deficits, debt, and tax rates.

"Today, we are fulfilling the promise of a smaller government that lives within its means," Christie, a Republican, told the Democratic-controlled Legislature.

With many states suffering from vast budget problems, Christie said, his "tough decisions" could put New Jersey ahead of the curve when it comes to economic recovery and growth.

To that end, he stuck to his campaign promises to lower taxes on businesses and forgo an income-tax hike on the wealthy. His plan does not raise any major taxes and calls for a firm 2.5 percent cap on local property-tax increases.

Instead, he opted for spending cuts that will affect homeowners, the poor, public schools and colleges, among others, to close a projected $11 billion deficit. A popular college scholarship program would be closed to new students; the disabled would be charged more for support services; and low-income workers would see a tax credit trimmed, to note just a few examples.

Those reductions, plus the rebate suspension, drew fire from Democrats, who contrasted the cuts with Christie's refusal to renew a 2009 tax increase on filers who earn $400,000 or more.

"Wealthy people in New Jersey got a tax cut. The middle class and the poor are going to get a tax increase. It's that simple," said Senate President Stephen Sweeney (D., Gloucester). Leaving the higher tax in place would bring in an additional $800 million to $1 billion; it would be enough, Sweeney said, to soften the blow in many areas.

Christie, whose ascension has returned Republicans to relevance in New Jersey, will still have to maneuver his plan through the Senate and Assembly.

In suspending property-tax rebates for a year, Christie made his single largest cut and took a political risk, reversing course on a core campaign pledge to protect or increase the checks.

The rebates will return in May 2011 in the form of quarterly credits on homeowners' property-tax bills. But the budget includes funding for just one payment that would equal 25 percent of the amounts given out last year. The remaining installments would have to be paid for in future spending plans.

Rebates for tenants would be eliminated, according to budget documents, and the "senior freeze" program that controls property taxes for senior citizens will not accept any new enrollment.

Christie characterized the rebate change as the end of a political "gimmick," noting that it cost $10 million a year in interest to borrow the money needed to send the checks out just before Election Day.

Democrats, however, pointed to Christie's campaign rhetoric - he called Gov. Jon S. Corzine's rebate cuts last year a "declaration of war on the middle class" - and said the rebate suspension, combined with aid cuts to municipalities and schools, would translate into a massive property-tax increases.

The rebates went out to roughly one million homeowners last year and typically were between $670 and $1,300.

"Today not only did [Christie] go back on those [campaign] promises, but he told New Jersey's already-stressed middle class to drop dead," Assemblyman John Wisniewski (D., Middlesex), the Democratic state chairman, said in a news release.

Christie said New Jersey had too long put off the kind of spending reductions he proposed. He opened his speech by running through the litany of financial problems the state built up even while its tax rates and debt rose.

He ruled out increasing taxes, sternly warning Democrats eyeing the income tax. "I was not sent here to approve tax increases; I was sent here to veto them," Christie said to loud Republican applause. "Mark my words. If a tax increase is sent to my desk, I will veto it."

Republican lawmakers, watching the first GOP budget proposal since 2001, cheered heartily.

"Chris comes down and says, 'Guess what, I'm fighting. ... I'm going to go out there and fight for the taxpayers, and I'm kicking some butt,' " Assemblyman Jon Bramnick (R., Union) said.

Christie's plan would spend $29.3 billion of state funds and federal stimulus money, an 8.9 percent drop from the amounts he inherited in January.

The largest reduction, the rebate cut, saves $850 million. The budget also skips $3 billion of pension payments, digging a deeper hole for the ailing retirement system.

Many smaller cuts could still have a pronounced impact. Christie said he would save $8.8 million by trimming 1,300 state jobs, and an additional $2 million by allowing the public New Jersey Network to convert to an independent nonprofit entity. He expects to save $50 million by privatizing some state functions, though a task force is still studying the idea.

The NJ STARS program, which gives community-college scholarships to top high school graduates, will not accept new students this year, to save $1.7 million. The Pharmaceutical Assistance for the Aged and Disabled program, which provides low-cost prescriptions to seniors, will have increased co-pays and a $310 deductible. Funding for school lunch programs will be cut back.

The larger reductions hit broad swaths of local governments across the state. Schools would see an $819 million, or 7.4 percent, drop in state support, largely due to the loss of $1.1 billion of stimulus money. Municipal governments will lose $446 million in aid, a 23 percent decrease.

Democrats said such reductions would force property-tax increases, but Christie argued that towns and school boards will also have to cut back.

"Local governments and school districts must be our partners in this shared sacrifice," Christie said.

He proposed a constitutional amendment to place a 2.5 percent cap on annual property-tax increases, down from 4 percent, and vowed to give towns and schools reform "tools" that will help them control local labor costs.

Voters would decide on the amendment in November, though the plan could be put in place by law for 2010. With the new limit in place, voter approval would be needed for any property-tax hike larger than 2.5 percent. The plan is latest in a long line of attempts to control the state's high property-tax bills, a source of frustration for years that now cost the typical homeowner $7,300.

To help towns and schools cope with the lost aid, Christie proposed rewriting the rules of labor negotiations to give local leaders more leverage when facing unions.

Christie also called for cutting the pension benefits state workers accrue in future years. Unlike many changes proposed in the past, this cut would impact existing employees.

In a change that could affect Camden, the special municipal aid program, which provides support to struggling cities, would be modified. That program would be part of a new "Transitional Aid" program with different application requirements.

"No longer will we reward cities and towns who irresponsibly spend," Christie said. "The message is simple: We are ending this aid, and soon, so get your act together now."

While the major taxes in the budget - income, state and corporate - will decrease or remain unchanged, some groups will pay more.

Hospitals will pay $45 million more in provider taxes, helping to bring in an additional $45 million in matching federal funds. The money will be sent back to hospitals.

Christie's budget relies on $1 billion of soon-to-expire stimulus funds. When that aid expires next year, it will leave a hole in the 2011-12 budget. Christie had hammered Corzine for relying on so-called "one-shot" revenues last year, saying such maneuvers made the current deficit far worse. Corzine used $2.3 billion of stimulus aid.

Christie Budget Highlights

Property-tax rebates: Suspends all property-tax rebates in 2010. The relief would return in May 2011, when homeowners would receive the first of four quarterly credits on their tax bills. The credits would total what homeowners received in 2009, but the budget contains funding for only the first payment of 25 percent. The rest would come from future spending plans.

Tax breaks for seniors: Stops new enrollment in the "senior tax freeze" program, which holds down property-tax bills for older citizens.

Education and municipal aid: Reduces school aid by $819 million, or 7.4 percent, and municipal aid by $446 million, or 23 percent. Support for higher education would go down $170 million through cuts to colleges and scholarship programs.

Property-tax cap: Proposes a hard cap of 2.5 percent on property-tax increases. A local government that wants to exceed the limit would need voter approval. To help municipalities and schools, Gov. Christie would reshape rules concerning contract negotiations to give more leverage to mayors and school boards.

Benefits to low-income residents: Reduces several programs and benefits for those with low incomes, including trimming a tax credit for the working poor, eliminating welfare for "able-bodied" residents, cutting child-care programs, and increasing deductibles and co-pays for Medicaid and the Pharmaceutical Assistance to the Aged and Disabled prescription program.

Other taxes: The budget would not raise any major taxes - sales, income or corporate - and would allow a 4 percent surcharge on corporate business taxes to expire. An income-tax increase on filers earning $400,000 or more expired in December and was not renewed.

Overall spending: Cuts spending of state funds and federal stimulus money to $29.3 billion. That's down 8.9 percent from $32.2 billion of comparable spending in the plan Christie inherited in January.