Budget of $29B approved in N.J.

TRENTON - New Jersey lawmakers yesterday approved a $29 billion budget that addresses drastically falling revenue by cutting property-tax rebates, raising income taxes, and relying on more than $2 billion in federal stimulus aid.

Democrats said the spending plan for the fiscal year that begins Wednesday would provide rebates to those who needed them most - senior citizens, the disabled, and other homeowners making less than $75,000 - and protect schools and health care for the poor.

"Even in these tough economic times, we are going to be able to make investments in core programs and services that strike at the heart of our New Jersey values," Assembly Budget Chairman Lou Greenwald (D., Camden) said.

But Republicans said Democrats were again relying on one-time fixes that would get them and Gov. Corzine through this election year but add to costs and problems in the future.

Assembly Republican Budget Officer Joseph Malone, of Burlington County, said that while Democrats boasted about restoring property-tax relief, more than one million households would still lose rebate checks.

"The budget we are considering today is nothing more than a mosaic of deferrals, deception, raids and tax increases," he said.

The Assembly passed it, 45-34, mostly along party lines. The Senate vote was 22-17.

With heavy doses of campaign posturing, each party blamed the other for New Jersey's fiscal problems. Republicans said the tough budget was due to eight years of Democratic mismanagement in Trenton. Democrats blamed the Bush administration for the national economic meltdown that crippled state revenue.

The Assembly budget vote followed nearly four hours of debate, during which Republicans read letters from constituents urging spending cuts and lower taxes. Several letters came from residents who said they might be forced to leave the state, a theme that Republicans echoed throughout the day.

Sen. Kevin O'Toole (R., Essex) said the state's financial woes had been obvious for years.

"It didn't come to us overnight. We built this problem brick by brick, tax by tax," he said.

Greenwald challenged Republicans to present a realistic alternative.

Added Senate President Richard J. Codey (D., Essex), "This state is like every other state throughout this country," facing problems because of mistakes in Washington.

The budget bottom line is down by roughly $4 billion from the plan Corzine signed last year. But the spending total does not count $2.2 billion in spending sustained off the books by stimulus aid.

That money would largely go to schools and Medicaid, the health-care program for the poor.

The largest cut is a $940 million reduction in pension funding, reducing costs now but increasing a deficit that will have to be paid back in the future.

Residents 65 and older and the disabled would keep the property-tax rebates they received last year.

Homeowners earning between $50,000 and $75,000 would get rebates at a reduced amount. Those making less than $50,000 would get the same check as last year. About one million people would still get rebates.

Last year, the checks went to homeowners earning up to $150,000, so roughly 500,000 homeowners will be cut out this year. More than 700,000 renters also have been dropped from the program.

Income taxes would rise on filers earning $400,000 or more. Those earning a million or more would face the highest new rate, 10.75 percent. Republicans said it would be the highest top state rate in the nation.

Others would also pay higher income taxes because of new limits on how much property taxes some could deduct from their state tax returns.

Filers earning between $150,001 and $250,000 would be able to deduct $5,000 of property taxes paid, down from $10,000. Those with incomes of more than $250,000 would lose the deduction entirely.

In all, the income-tax hikes would bring the state an additional $1 billion.

Taxes also would rise on cigarettes; alcohol, except beer; insurers; and lottery winnings larger than $10,000. A business tax set to expire would be extended.

The plan relies on $325 million of savings expected from labor unions under a yet-to-be-ratified proposal to delay contracted raises for 18 months and impose nine furlough days in exchange for seven paid leave days workers could cash out later.

Despite the dire circumstances, the budget passed in advance of its deadline and with little rancor among Trenton's ruling Democrats.

One lawmaker who had vocally objected, Sen. Joseph Vitale (D., Middlesex), supported the budget after saying he had reached a deal with Corzine to continue an expansion of a health-care program he has championed.

The budget was one of dozens of controversial bills taken up in a marathon voting sessionthat ran past 11 p.m.

Many lawmakers said there was little to fight over on the budget, with state revenue so low. Others just hoped to get it behind them.

"There's nobody smiling in here," said Senate Majority Leader Stephen Sweeney (D., Gloucester).

The picture appeared more grim last week, when lawmakers first expected to vote on the spending plan. But a tax amnesty beat expectations by more than $400 million. Lawmakers put the money into the politically popular rebate checks, restoring them for 500,000 homeowners.

Despite the economic problems, the budget increases funding for public schools slightly and cuts aid to towns by just 3 percent. Both aid amounts can have significant impacts on property taxes.

The state constitution requires a budget be signed into law by July 1.