Christie Expects Revenue Surge to Fund Budget, Tax Cuts

Banking on booming revenues over the next 16 months, Governor Chris Christie yesterday proposed a $32.1 billion budget with a $1.1 billion spending increase that includes funding for the first stage of a promised 10 percent income tax cut, but provides less money for direct property tax relief than the year before.

Christie’s treasurer, Andrew Sidamon-Eristoff, is projecting a surge in tax receipts this spring that will wipe out the current $325 million shortfall in state revenue projections for the current year, followed by such soaring growth in income and corporate taxes in Fiscal Year 2013 that state revenue collections will approach the record levels of pre-recession Fiscal Year 2008.

In fact, Christie’s total state spending of $49.474 billion -- including federal funds, the Transportation Trust Fund, and revolving and dedicated funds – would be the largest in New Jersey history, topping Democrat Jon Corzine’s final budget of $48.5 billion for Fiscal Year 2010 that was swelled by Obama administration stimulus funding.

The projected $2.2 billion in expected state revenue growth in Fiscal Year 2013 over the original Fiscal Year 2012 budget enabled Christie to pump the required $1.06 billion into the pension system, increase school aid by $120 million, and boost aid to higher education by 6 percent -- and still set aside $183 million for the first year of his income tax cut and $164 million for the second year of his business tax cuts.

"Why not cut income taxes when our fiscal house is in order?' Christie demanded in his budget speech in the Assembly Chamber, asserting that his budget met all of the state's real fiscal needs. Democrats countered that Christie was asking the wrong question. "Yes, the people of New Jersey deserve a tax cut," said Senate Majority Leader Loretta Weinberg (D-Bergen). "But they want a cut in property taxes, not a $7,000 income tax cut for millionaires and an $80 cut for working people." 

The battle between the Republican governor and Democratic legislative leaders over whether to cut income taxes or property taxes began last month after Christie made a 10 percent income tax cut phased in over the next four fiscal years the centerpiece of his third State of the State Address -- and, as a result, the focal point of both this spring's budget debate and his upcoming 2013 reelection campaign.

Democrats control the Senate 24-16 and the Assembly 47-33, so Christie cannot pass the budget or income tax cut he wants without winning over at least five Democratic votes in the Senate and eight in the Assembly. But Democratic legislative leaders lack the two-thirds majority needed to override Christie's veto if they substitute a property tax cut for his income tax cut in the budget they approve in June. If Christie and the Democrats are unable to reach a compromise, the state could be headed for a budget impasse on July 1, the constitutional deadline for passage of a balanced budget.

Assembly Speaker Sheila Oliver (D-Essex) pledged that Democrats would develop their own tax cut package in the weeks ahead, and Assembly Majority Leader Louis Greenwald (D-Camden) left no doubt that the focus would be "property taxes, property taxes, property taxes."

The first important public debate will come when the Senate and Assembly budget committees review Christie budget's aggressive revenue assumptions with Sidamon-Eristoff and David Rosen, budget officer for the non-partisan Office of Legislative Services.

It won't take Democrats long to realize that Christie is actually planning to spend more during Fiscal Year 2013 than the revenue he is expecting the state to take in, that he is relying more on one-shot revenues, and that he is planning to cut the state's surplus to less than 1 percent of the budget in a year in which he is betting on abnormal revenue growth.

Senate Minority Leader Tom Kean (R-Union) defended Sidamon-Eristoff's revenue numbers, noting that his projections for the first two years were "right on the mark," while Assembly Minority Leader Jon Bramnick (R-Union) dismissed the idea that Christie might want higher revenue numbers this year to justify his income tax cut. "What, our cheapskate governor?" Bramnick asked.

But Senate President Stephen Sweeney (D-Gloucester) pointed out that he accurately predicted last July that Christie's insistence on keeping a large surplus in this year's budget, rather than providing the additional money for school aid, municipal aid, and property tax relief that the Democrats wanted, meant that Christie was setting up the budget to call for an income tax cut -- as he did seven months later. "They play games with the numbers too," Sweeney insisted.

According to the Fiscal Year 2013 Budget Summary released by the Christie administration yesterday, state revenue is projected to grow 7.5 percent to $31.858 billion -- a $2.217 billion increase over the $29.641 billion originally budgeted for Fiscal Year 2012 in the Appropriations Act that Christie signed into law last July after redlining hundreds of millions of dollars of state aid programs added by the Democrats.

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