Horizon Drama on Budget Eve

With a June 30 constitutional deadline looming, whispers of a possible government shutdown making their way through the halls of the Statehouse, and no clear indication that Governor Christie would ultimately sign it, Democrats rolled out and passed a $34.7 billion budget for FY2018 late Monday night. The Democrats budget is nearly $320 million above the Governor’s budget and includes an additional $100 million for schools, $25 million for pre-school programs, and smaller amounts for a variety of social services including domestic violence prevention and prisoner re-entry efforts.

The budget is tentatively scheduled for a final vote before the full Senate and Assembly on Thursday but the Governor’s signature is not a foregone conclusion. Christie had previously given signals that his support for the Democrats budget is conditioned on passage of a bill to use State Lottery revenues to help fund the public employee pension system, as well as another bill that would allow the State to tap into Horizon’s $2.4 billion reserve fund. The lottery bill appears to be a done deal; Horizon’s restructuring, not so much…

The Assembly Budget and Senate Budget & Appropriations Committees both unanimously approved legislation on Monday to make the State Lottery an asset of the $73 billion State Pension System. According to the Front Office, the change would add a $13.5 billion asset to the pension books, raising the funded ratio of the state’s overall retirement system to 90 percent after three decades — a significant increase over the status quo. By providing the lottery revenue to the pensions — about $1 billion a year — the state could simultaneously reduce its annual payment by the same amount. Proponents argue that it would free up more money from the general fund to pay for programs that the lottery revenue currently supports. Critics call it a budget gimmick. We’re just calling it a done deal.

Christie has been demanding a bill calling on the State to tap into Horizon’s $2.4 billion reserve fund, purportedly to underwrite drug addiction efforts. The effort has gained traction in the Senate, where legislation that would largely implement his proposal overwhelmingly passed the Budget & Appropriations Committee yesterday, three days after it was introduced. The bill is scheduled to be voted on by the full Senate this Thursday, despite strong objections from Horizon officials and supporters, business trade associations, and some labor unions. However Assembly Speaker Vincent Prieto has declared it DOA in his chamber and said he would not post it for a vote.

On the eve of the final scheduled legislative session of the fiscal year, negotiations will continue in an attempt to get the Assembly, Senate and Front Office all on the same page. Would the Legislature act on the budget without an agreement on Horizon? Would the Governor sign a budget bill without a Horizon bill to accompany it? New Jersey has until Friday to enact a balanced budget and avoid only the second State shutdown in history (the first was in 2006).