Chris Christie and New Jersey’s balanced budget legacy
TRENTON, December 21, 2017: New Jersey Governor Chris Christie, like many other state executives, has had a tough time grappling with the post-financial crisis of 2007 era. Christie, however, has put together balanced state spending plans, while simultaneously facing considerable revenue shortfall problems.
Shortfalls which were the result of a significant over-reliance on non-recurring revenues. And the cleverly crafted one-shot deals, or “revenue gimmicks”, used by predecessors to fund special pet projects.
Overfunding a non-profit here, providing additional or unjustified state aid for a healthcare facility there, and the all too infamous Xanadu project that went nowhere fast, were some of the fundamental flaws that plagued the budget process.
All of it contributing to New Jersey’s rising fiscal instability and exacerbating its extensive economic woes.
Budget deficit of 10.7 billion FY 2011
According to the FY 2011 Budget in Brief, New Jersey’s fiscal shortfall or budget gap, the overall difference between recurring revenues (not including one-time revenues, diversion and deferrals and annual spending, was a whopping 10.7 billion dollars. The largest in the state’s history.
That is by no means a small figure. It is roughly twice Vermont’s 5.8 billion annual budget, or about the size of Maine’s annual budget of 8.1 billion dollars. Notwithstanding the immense proportion of the fiscal deficit, at the close of 2015 that 10.7 billion dollar figure shrank to roughly 6 billion.
There are always two sides to a fiscal imbalance: spending and finding ways to pay for that spending. Raising revenues through higher taxes has been a major budgetary concern. Particularly for states trying to lure private sector investment in hopes of boosting overall job and wage growth.
Governor Chris Christie vetoed any attempt at legislating an income tax increase during his two terms.
Relying predominantly on the economic growth engine of his state to fill its coffers and fund its mandatory balance sheet activity. Revenues have grown steadily from 27.9 billion in FY 2010 to 34.7 billion in FY 2018. Now that Democrats are in control of the front office, expect the state to revisit the income tax issue again, sometime in the short run.
Solving three of the states biggest problems
On the spending side, however, budget officials here in New Jersey face three major funding issues: Pension Funding, Providing Property Tax Relief and ensuring equitable School Funding Formula dispersal.
Chris Christie tackled Pension Reform in his very first budget by reducing the size of government. Adamantly putting the state’s spending in line with its revenues. When the concept of ‘fiscal austerity‘ hit the mainstream media, cutbacks in unnecessary spending were widespread and rampant. The only corrective course of action for a state budget that had spun recklessly out of control.
Christie’s administration made more overall contributions to the state pension system than the three previous governors combined. A total of 8.7 billion dollars. Christie even went so far as to create a unique opportunity for state unions to take control of their pension contributions. This removes the burden of investment from the taxpayers, placing the responsibility directly in the hands of the unions themselves.
This is by far the biggest gift to unions since Jimmy Hoffa.
Property Tax Relief
New Jersey arguably, between the taxpayer and the local tax office, has the highest property taxes in the nation. According to the Tax Foundation, a national think tank, the mean property tax rate is about 2.11 percent. That would put the estimated tax bill on a 350,000 home at around 7,000 annually.
In Voorhees New Jersey it’s about $13,000. You might need a loan just to pay this.
Governor Chris Christie worked decisively to hold municipalities to a firm 2% cap. Without this in place that $13,000 would have been higher. His FY 2018 budget provided direct property tax relief of 865 million for over half a million New Jerseyans.
His ability to control core spending showed great fiscal discipline and economic savvy.
Take recurring revenues for example, unlike the Corzine era, use of non-recurring revenues dropped from 13.2% to 2.8 %. This shows less reliance on gimmicks and more precise revenue estimates. Will this new governor allow past spending habits to resurface, unchecked and unrestrained with no state audit of local governments?
Being able to keep spending down to recurring revenues without raising taxes was a truly remarkable feat for the two-term Republican Governor from Morris County. He was also able to increase funding to the education of the state’s most precious and vital resource.
Funding for K-12 education in the state of New Jersey amounted to 8.1 billion dollars this year. Those dollars went to Special Education Aid in places like Elizabeth 13 million, Patterson 15 million, Jersey City 18 million, and Newark 28 million; and Equalization aid of 6.2 billion, of which Mt Laurel received 0, and Moorestown didn’t receive a single penny.
Morris County, in general, received little if any Equalization aid either. Surprisingly these towns were able to make do on their own.
When Christie took office Equalization aid was funded at 5.7 billion and total state aid for K-12 was 7.9 billion. Even average teacher salaries went up from 62,000 in FY 2009 excluding benefits to 87,000 including benefits in FY 2017.