Christie vetoes 'millionaires' tax,' other items from budget

TRENTON - In an anticipated move, Gov. Christie on Monday vetoed key components of the $34.1 billion budget passed last week by Democratic lawmakers, leaving a spending plan without an income tax increase on the wealthy - and a smaller payment into the state pension system - in place for the fiscal year beginning Tuesday.

Christie nixed a three-year tax increase on income over $1 million and a one-year surcharge on the corporation business tax, saying the increases would hurt the economy.

"I strongly believe 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 Republican governor said in a message accompanying his vetoes Monday evening.

Democrats said the fiscal 2015 budget, reduced to $32.5 billion by Christie's moves, would worsen the state's fiscal condition by slashing its contribution into the pension system from $2.25 billion to $681 million. They said that would lead to greater costs in the future.

The size of the pension payment was the driving factor in the plan passed by Democrats, who said the state had an obligation to make a full $2.25 billion payment into the system as part of the pension-overhaul deal reached during Christie's first term.

But Christie argued that the state could not afford to make the full payments scheduled for 2014 and 2015, given a $1 billion revenue shortfall that opened up in last fiscal year's budget after April income-tax collections failed to meet his projections.

Christie cut back the 2014 pension payment from $1.58 billion to $696 million.

While the reduced amounts do not pay down the unfunded liability, he said, they cover the costs accrued by current workers.

The governor, who is weighing a run for president in 2016, had repeatedly vowed to reject tax increases as a way to make the full payments, saying more changes were needed to reduce the costs of the pension system.

Senate President Stephen Sweeney (D., Gloucester) said Monday that Christie "has decided to continue protecting the state's wealthiest at the expense of the middle class and working poor."

"His belief in punishing the middle class," Sweeney said in a statement, "is one of the reasons New Jersey's economy continues to lag behind that of our neighbors and the nation, while working people suffer the brunt of the consequences."

Asked by reporters whether he would consider trying to override Christie's vetoes, Sweeney said any such attempt would have to originate in the Assembly. "They have to start any kind of an override when it's revenue-raisers."

Although each house of the Legislature is controlled by Democrats, they would need Republican support for the two-thirds majorities needed for an override.

Assembly Speaker Vincent Prieto (D., Hudson) attacked Christie for cutting the pension payment and refusing to increase a tax credit for the poor, while rejecting a tax hike on the wealthy, but said the public could take "some solace" in the fact that Christie accepted increased funding for Democratic priorities such as nursing homes and domestic-violence programs.

Christie's budget is likely to face a court challenge by public-sector unions. While a state judge ruled that Christie could cut the pension payment for fiscal 2014, given the magnitude of the late-year revenue shortfall, she also ruled that the governor had breached his contract with the unions.

The New Jersey constitution affords the governor the power to veto any line item in the budget. He cannot add to it.

Among Christie's line-item vetoes was funding for civil legal services for the poor, which Christie cut from $20 million to $15 million to reflect the "current fiscal reality."

He struck a provision that would have enabled undocumented immigrant students to qualify for tuition-aid grants to attend New Jersey colleges and universities, after signing a law in December that let those students pay in-state tuition rates. And he vetoed $7.5 million for family planning - as he has in years past - saying his budget already provided appropriate funding for health care.

Christie also vetoed a provision in the tax on millionaires that would have restored funding for the state's earned-income tax credit to 25 percent of the federal credit, up from 20 percent.

Low- and middle-income wage earners can claim the credit on their income taxes.

Christie cut it in 2010. "I have previously expressed my support for the concept of raising the amount of this credit," Christie wrote in his veto message Monday, "but only as part of a broader initiative to lower the tax burden on all beleaguered New Jersey taxpayers."

Gordon MacInnes, president of New Jersey Policy Perspective, a left-leaning think tank, called Christie's veto of the credit a "de facto tax hike on half a million working poor families" who receive it.

Addressing when the state makes certain payments, Christie delayed property-tax rebates from August until May 2015, to better match "the timing of the actual receipt of state revenues."

He cited the same rationale in vetoing a measure that would have required the state to make quarterly payments into the pension system, as opposed to one payment at the end of the fiscal year.

Christie eliminated language that would have required the state Department of Community Affairs to submit quarterly reports to the Joint Budget Oversight Committee detailing payments to state contractors managing the Reconstruction, Rehabilitation, Elevation, and Mitigation program created to distribute grants for rebuilding in the aftermath of Hurricane Sandy.

He said the language would have imposed "burdensome reporting requirements on a program that already is fully transparent."

Critics say the program lacks transparency, given that the administration terminated its $68 million contract with the Louisiana firm Hammerman & Gainer Inc. in December without public notice.