As expected, Gov. Chris Christie signed a new budget Monday evening that includes a series of vetoes on tax hikes approved last week by the state Legislature for the upcoming fiscal year.
The $34.1 billion budget put forth last week by the Democrat-led Legislature included a full $2.25 billion scheduled pension payment, but drew on tax hikes on both businesses and millionaires in order to do so. Instead, Christie returned a signed $32.5 billion budget vetoing those proposals and featuring more than $1 billion less in spending.
Christie will now also look to cut the full pension payment down to $681 million to make up for a looming $1.7 billion revenue shortfall.
The Democrats’ plan had called on raising the income tax rate on those earning more than $1 million annually from 8.97 percent to 10.75 percent, upping the corporate business tax from 9 percent to 10.35 percent and delaying Business Employment Incentive Program tax abatements for one year. Altogether, Democrats had said their package of proposals would have generated some $1.3 billion in new revenue for the state.
RELATED: Christie 'happy to have a conversation' about North Jersey casino expansion
In his veto addressed to the Senate, Christie wrote that “punitively raising taxes on our already overtaxed residents and small business owners is not the answer to the State’s short- and long-term fiscal challenges.”
“The Legislature’s budget, if enacted, would accomplish nothing more than to repeat the failed, irresponsible and unsustainable policies that were commonplace in Trenton for years before my administration,” Christie wrote. “Simply stated, I do not accept the premise that we can tax our way to prosperity in this manner.”
Senate President Steve Sweeney (D-West Deptford) said that Democrats are “disappointed” with Christie’s decision, which he says protects “the state’s wealthiest at the expense of the middle class and working poor.”
“Democrats presented a budget to the governor that met our obligations while not placing the burden on working people,” Sweeney said. “Our budget was a fiscally responsible plan that would have honored the state’s commitments and increased funding for critical services. It was the right thing to do for all New Jerseyans.”
Assembly Speaker Vincent Prieto (D-Secaucus) added that Christie’s decision to not make a full pension payment “will push New Jersey closer toward fiscal disaster” and its “ramifications will unfortunately be adversely felt by taxpayers for years to come.”
Still, Christie’s pension plans may face a legal hurdle. Last week, citing a state of fiscal emergency, Superior Court Judge Mary Jacobsen ruled in favor of Christie’s proposal to slash the current fiscal year’s scheduled pension payment by nearly $900 million, but noted the decision did not apply to the upcoming fiscal year.
Another court showdown is expected to play out in the upcoming months.
Standard & Poor’s, one of three Wall Street rating agencies to have issued credit rating downgrades to New Jersey since April, warned the state earlier this month that Christie’s plans for balancing the budget through reduced pension payments could spur yet another downgrade.
“In our view, the governor’s decision to delay pension funding, while providing the necessary tools for cash management and budget control, has significant negative implications for the state’s liability profile,” the agency said in its June 2 report. “Pension funded levels, which were expected to decline until the state reached the full funding of annual required contribution, are now expected to decline much more significantly and place increased pressure on future funding requirements.”
ALSO ON NJBIZ: