Tuesday, February 21, 2012

Gov. Christie Issues Budget Recommendations

New Jersey Governor Chris Christie has issued his budget recommendations for the upcoming fiscal year, and he's increased spending by nearly $2 billion dollars to $32.1 billion. The full text of his speech is here, but I think we're heading for a repeat of problems.

There's a little bit of something for every group, including increased spending for education and the first portion of his proposed tax cuts:
The budget put forward by Christie projects total state revenues growing by more than $2 billion during the next budget year, which begins on July 1 and runs through June 30, 2013.

"In one word, it's all about growth," state Treasurer Andrew Sidamon-Eristoff said in an earlier briefing with reporters. “The trend line is clearly positive.”

The projected revenue growth will cover a $121 million increase in formula aid to schools and a more than $1 billion payment into the grossly underfunded state pension system.

The increased revenue would also provide enough money to offset $530 million in planned tax cuts, including $183 million in revenue lost to the first phase of Christie’s proposed three-year income tax cut.

Despite the planned growth, the governor’s spending plan does not increase Homestead property tax relief even after property tax grew on average in 2011 to a record-high statewide average of $7,759.

The budget also provides flat funding to hospitals, cuts overall aid to towns and leaves the state with a razor thin surplus fund of $300 million.

Christie, however, does increase spending in other areas and pays for his tax cuts by banking on that increased revenue.

“Because we have made the tough choices in these last two years, we can make the right ones now,” he said.
Tough choices had to be made, but now we're about to abandon the tough choices by increasing spending beyond what we should rightfully expect in terms of tax revenues. The budget should probably fall into the $31 billion range, not the $32 billion range - the expected revenues for the upcoming year can't support the levels Christie proposes. That would hurt his chances to get tax cuts, so he's figuring on a 7% increase in revenues even as revenues for the current year are lagging estimates.

I would much rather see the state spend more on infrastructure to make a down payment towards getting critical infrastructure rebuilt, replaced, or built, as well as vastly increased pension contributions to make up for the historical shortfalls to help bring the pension funds into balance. They aren't sexy programs, but they are critical to the state's future obligation.

Even as property taxes continue to rise, they are doing so at a lower rate than in past years as a result of reforms instituted during Christie's term. Additional state aid would further reduce property tax hikes - the primary reason that property taxes are what they are. However, let's not forget that the personal income tax was imposed as a way to reduce property tax burdens, the sales tax was increased to pay for property tax relief (that was then scaled back while keeping the rate at the same level), and now New Jersey has one of the highest overall tax burdens in the nation.

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