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Agreement on a $1 trillion bill to fund the budget through Sept. 30 includes provisions that could affect New Jersey Wochit

The New Jersey State House in Trenton.(Photo: Nicholas Pugliese/northjersey.com)

As part of their $34.7 billion spending plan introduced Monday night, Democrats hope to spendsome $350 million on top of the budget Gov. Chris Christie proposed in February to give to schools, scholarships and other priorities.

That plan, however, relies on revenue assumptions that have provedoverly ambitious in five of the past seven years and would draw down the states surplus a cushion built into the budgetshould anything go wrong to a level lawmakers from both parties consider uncomfortably low.

All the while, New Jersey is facing a gaping structural budget deficit fueled by ballooning pension costs that will only get worse at the start of 2018, when the next round of Christie-backed tax cuts phases in, according to an analysis released last month by Moody's Investors Service.

It is not a budget that I think anyone particularly likes, Assembly Budget Chairman Gary Schaer, D-Passaic, said Tuesday. Historically, its the type of budget weve been doing each and every year under the Christie administration, which is simply try to get by.

Assemblyman Gary Schaer, D-Passaic.(Photo: Adam Anik/NorthJersey.com)

The fate of the Democratic spending plan is still unknown. Lawmakers have until the end of the week to pass a budget and send it to Christie, who has the power to veto it line by line before signing it into law.

Democratic leaders have sought in recent days to negotiate a budget with Christie that they know he will sign, but they remain divided over a controversial proposal to allow the state to funnel reserves from its largest health insurer, Horizon Blue Cross Blue Shield, into a fund for anti-addiction initiatives.

According to several legislative sources, Christie has tied passage of that measure and another to transfer the state lottery into the pension system to his support for the Democrats spending plan. The House and Assembly are expected to vote Thursday on the budget bill, which can still undergo revisions.

There are items for members of both parties to applaud in the Democrats version of the budget. On the education front, the plan provides $100 million in new state aid for public schools plus $25 million to expand prekindergarten programs throughout the state.

It allocates $25 million to extraordinary aid for special education, an element that apparently was added after discussions with the Christie administration. And more controversially, it redirects $31 million down from $46 million under a previous proposal to underfunded districts from those that receive more than the states existing school funding law says they should. Cuts to any one district are capped at 2 percent of state aid.

The budget proposal also finds money for a slew of relatively unobjectionable programs and causes: $8 million for prisoner reentry programs, $6.5 million for tuition aid grants, $2.2 million for domestic violence and rape prevention, $2 million for cancer research and $145,000 for Boys & Girls Clubs, among others.

But in a big-picture sense, the budget is disappointing to lawmakers like Assemblyman Declan OScanlon, the Republican budget officer from Monmouth County.

Why are we not talking about real reforms to fix our overall budget? he said Tuesday. The longer we wait, the deeper this hole gets.

Assemblyman Declan OScanlon, R-Monmouth, at a 2016 press conference.(Photo: John C. Ensslin/NorthJersey.com)

Moodys wrote in a May analysis that a mix of tax hikes and structural spending cuts is the only way to ward off a looming financial crisis in New Jersey. Otherwise, economic growth alone is unlikely to fill a budget gapthat could reach $3.6 billion by 2023.

In other words, revenue is not predicted to keep pace with the state's fiscal obligations, primarily those related to its beleaguered pension system.

That report was released a week after the Christie administration said it was facing a projected $527 million revenue shortfall in the current fiscal year, an announcement that has become something of a springtime routine in the Christie years.

The administration has missed its revenue targets in five of itsseven budgets, and state revenues will face even more pressure in 2018 as additional cuts to the sales, estate and other taxes negotiated by Christie last year in exchange for a 23-cent-a-gallon increase to the gasoline tax are phased in.

Liberal activists held a press conference outside the State House on Monday to criticize the Democrats' proposed budget for not doing more for environmental programs, NJ Transit and low-income families. Spending on those items has been crowded out by other budget demands.

Even against this backdrop, Democrats believe they have found a way to pay for all their 2018 budget priorities.

Most significantly, they rely primarily on revenue estimates from the Christie administration that, as of May, were about $231 million higher than estimates from the nonpartisan Office of Legislative Services. State Treasurer Ford Scudder said in May that he could generate $200 million in additional revenues in the2018 fiscal year by improvingNew Jerseys tax collection methods.

Democrats would also tap New Jerseys Homestead Benefit program, which is designed to lessen the property tax burden on elderly and disabled homeowners. Just as the Christie administration this year intends to delay some payments to municipalities and homeowners until July to help manage its projected revenue shortfall, Democratic lawmakers plan to defer $145 million in Homestead payments to the 2019 fiscal year to free up money for other priorities.

In addition, Democrats plan to draw down the states surplus to $413million, or 1.2 percent of theirbudget. Thats $39million less than what the Christie administration has proposed and much lower than the national median of about 5 percent of state appropriations.

Its your cushion, OScanlon said of the purpose of the surplus. If you have a cushion, it makes dealing with a revenue shortfall realistic.

Running a low surplus, however, leaves New Jersey little wiggle room should state revenues take an unanticipated hit.

Who loses then? OScanlon said. Its the people who depend on state services. The poor, the middle class, people with developmentally disabled loved ones.

Schaer agreed that New Jerseys low surplus is troublesome and has been for many years.

The problem is obviously that the more money you put into surplus, the less money you have to meet the needs of New Jerseyans, Schaer said.

Email: pugliese@northjersey.com

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