Corzine announces new spending cuts

TRENTON - Gov. Corzine yesterday detailed $839 million in spending cuts and $135 million in new revenue to close a nearly billion-dollar budget gap for the fiscal year that ends June 30.

In the waning days of his administration, Corzine targeted a wide range of programs, including employee pension plans, charter school aid, cancer research, and school surplus funds.

"Like nearly every state in the country, New Jersey's budget faces dual pressures from the severe national economic crisis - a fall-off in revenue, and greater demand for safety-net services and related needs such as Medicaid, the state food-purchasing program, and the senior property-tax freeze," Corzine said.

"We have worked hard over the last few weeks to meet this challenge and have identified $839 million in spending cuts across state government."

The revised budget puts spending in the current fiscal year at $28.6 billion, leaving Gov.-elect Christopher J. Christie with a projected $550 million surplus.

Corzine's plans would cut state aid to school districts and require schools in turn to dip into their surpluses, which function as rainy day funds, to the tune of $260 million.

The state would eliminate the $100 million it had planned to contribute to government employees' pensions. Originally, Corzine's budget scheduled a $1.1 billion contribution to the pension funds, already less than recommended by actuarial calculations.

The proposal would restore $20 million in municipal aid, which was frozen this month.

And Corzine's latest revisions would allow the income tax surcharge on the 1 percent of New Jersey residents earning more than $400,000 per year to expire at the end of this month, as intended. The administration estimated that an extension of that surcharge through the end of June would have generated $250 million to $300 million in revenue, but Corzine opted against the extension because Christie has said he would end it.

New revenue is slated to arrive from the implementation of the Powerball lottery, from tax compliance for previously undisclosed "offshore" income in Switzerland, and from the federal government for the earned-income tax credit.

School districts, which, according to state law, are supposed to keep no more than 2 percent of their annual operating budgets on hand as surplus balances, expressed concerns yesterday that dipping into already-slim rainy day funds could put them in precarious positions as they finish the year.

"It raises concerns about how we're going to get through the year without really affecting the education program," said Frank Belluscio, a spokesman for the New Jersey School Boards Association.

Tom Vincz, a spokesman for the Treasury Department, said the schools proposal - which requires legislative approval - would seek 75 percent of surpluses above 2 percent.

Belluscio said that in addition to the $260 million from surpluses, an additional $60 million in cuts to areas such as special education and debt-service aid also would affect schools.

He noted that school districts faced 20 percent to 25 percent increases in health benefit costs that take effect Jan. 1, which were not anticipated when districts were creating their budgets for the year.

Susan Bastnagel, spokeswoman for the Cherry Hill School District, said the district froze its budget last week.

"We were anticipating something because of the cuts to municipalities a couple weeks ago," she said.

Scott Oswald, superintendent of the Collingswood schools, said his district used its surplus to provide tax relief. Last month, the district froze spending in the hope of having that surplus for tax relief next year. Corzine's proposal would slam districts that have been good savers, he said.

"We're kind of getting penalized for doing what is right," Oswald said.

Pat Austin, business administrator for the Pemberton Township School District, said districts sometimes used their surplus to cover cash-flow needs such as salaries when state payments were late.

"This might create cash problems for a lot of districts," she said.

Joe Malone of the Assembly Republican Budget Office also said he was concerned that "the governor's actions to take aid from only those districts operating with a surplus is tantamount to punishing those who have planned and budgeted efficiently."

He also said that some of Corzine's budget changes "represent technical recognitions of overfunding in various government accounts or are deferrals of future obligations, such as pension contributions."

Senate Republican Leader Thomas H. Kean Jr. of Union County also had harsh words for the governor's proposal, saying he was "dismayed the administration chose to dole out more than $350 million in additional spending for a favored few while cutting school aid across the state."

A budget update released by the Treasury Department refers to $350 million in "updated base spending needs," including Medicaid, the senior freeze property rebate program and other, unidentified "safety net" programs.

Rich Bagger, co-chair of Christie's budget and tax task force, expressed concerns about the new spending, saying "there continues to be real risk of a further revenue shortfall in this year's budget."

"The fact that the Corzine administration plans to push through last-minute discretionary spending is cause for significant concern."

According to the administration, the current budget proposal is $220 million less than the amount spent the year before Corzine entered office. In keeping with previous administrations' accounting methods, however, the current budget figure does not account for more than $2.3 billion in federal stimulus funds.