Budget Address; Nominations Filed

On Tuesday, Governor Chris Christie delivered his final budget address to the Legislature. In his address, the Governor recapped his achievements over two terms including job creation, tax cuts and reforms, and cuts to discretionary spending. He also announced several bold and aggressive budget measures that he argued are necessary to balance the Fiscal Year 2018 budget.

The proposed $35.5 billion budget represents an increase of 2.6% over the current year. It also assumes 3.6% economic growth and projects a surplus of $491 million. Highlights include:

The Christie budget devotes the majority of increased spending to pension payments. The proposed budget makes a $2.5 billion pension payment and anticipates making the payments quarterly. The Governor boldly proposed taking proceeds from the state lottery – which accounts for $965 million in the current budget – to fund these payments. The Governor claimed that this idea would reduce New Jersey’s unfunded liability by $13 billion and increase the funded ratio of the pension by almost 15%.

Assembly Speaker Prieto was circumspect on this proposal following the address although Senate Democrats seemed more open to the idea. A plan to address pension obligations is important given that the dramatically underfunded pension system, which has contributed to New Jersey having one of the worst credit ratings in the nation including ten downgrades over the past seven years, supports the retirement of 800,000 public sector workers.

Despite recent speculation to the contrary, the budget address did not include a contentious plan to provide a flat rate of funding for schools across New Jersey. Christie last year proposed a complete overhaul of school funding that would guarantee $6599 in spending for every student whether their school is in an urban, suburban, rich or poor district. The Governor hinted in recent weeks that his budget address could include proposed formula reforms. Instead, Christie called on the Legislature to work with him to develop a new plan within the next 100 days and vowed to act alone if all sides could not reach agreement. While Democratic leadership wants action on this issue, the sides are far apart and a final agreement will require significant compromise. Any solution would roll back decades-old Abbott Supreme Court decision which set forth the current student funding formula. This one promises to dominate legislative action this Spring – stay tuned.

Governor Christie proposed tapping into Horizon Blue Cross Blue Shield’s $2.8 billion surplus – to the tune of $300 million – to underwrite parts of the drug addiction reform plan he introduced during his State of the State address earlier this year. Christie speculated that a permanent fund could be established using these revenues and suggested that Horizon should readily agree to this proposal, explaining that it generates billions in profit despite its non-profit status. For its part, Horizon forcefully pushed back, calling the proposal a money grab and explaining that its reserves are integral to maintaining coverage for policy-holders.

The Governor discussed the landmark agreement late last year to renew and replenish the beleaguered Transportation Trust Fund. The new 8-year, $2 billion capital program represents a 25% increase in funding for the repair and rehabilitation of our roads, bridges and transit systems. His proposed budget includes a $400 million supplemental appropriation to address bridge deficiencies and to bring all assets to a state of good repair. He called for these funds to be spent in the next 100 days. We’re still waiting for details on how funds will be spent…

Christie obviously wants to end his tenure with a bold budget that reflects his priorities and accomplishments over the past seven years, but it’s important to consider how much control he has over dynamics that will shape this year’s budget. For example, how much will election year dynamics play a role in this budget negotiation. Will the Administration’s economic growth projections hold true?

Looking beyond New Jersey’s borders, how much will the undulating political dynamic in Washington impact this budget’s anticipated 3.6% economic growth rate? How might a possible repeal/replace/reform of the Affordable Care Act (ACA) that includes Medicaid expansion affect New Jersey’s obligation to charity care? How might drastic changes to immigration policies impact New Jersey’s economy and work force? Will President Trump’s stated commitment to infrastructure translate to sufficient construction funding for the Gateway Program – a collection of projects that is absolutely integral to New Jersey’s long term economic security?

The answer to all of these questions at the moment is, “we’ll see…”. Look for more intel and insight from NorthStar on these and other key issues.

Read Governor Christie’s prepared remarks HERE.

Governor Christie filed a slew of nominations and direct appointments on Monday, in an effort to fill a variety of boards, commissions, authorities and judgeships.

Christie nominated retiring GOP Senator Kevin O’Toole and public affairs consultant Caren Turner. If confirmed by the Senate, O’Toole and Turner would replace Pat Schuber and George Laufenberg, respectively. We wish them both luck and offer two words of encouragement: “bus. terminal.”

In nominating retired judge Marguerite Simon, the governor hopes tries to end the long-running saga of a Commission unable to meet since March 2016 because of vacancies for three of its four seats. This has effectively tied the hands of the chief authority in New Jersey responsible for regulating campaign fundraising, spending and campaign finance disclosure.

Christie nominated for reappointment three members of the Transportation Trust Fund Authority, one member of the New Jersey Turnpike Authority, and one member of the Board of Public Utilities; he nominated former Administration official Lou Goetting to the Turnpike Authority. All are excellent public servants and will continue to provide professional and responsible leadership to their respective agencies.

These are only some of the highlights. Find a full list of the nominations and appointments HERE.