Christie vows to veto tax hikes in Democrats' $35B budget

TRENTON - New Jersey lawmakers passed a $35.3 billion budget Thursday along party lines that Democrats say makes a full contribution to the pension system for public workers, even as Gov. Christie is almost certain to veto the tax hikes that help fund it.

Christie said on NJ 101.5's Ask the Governor program Thursday evening that the Legislature appeared to be adopting "another ridiculous budget."

Of the lawmakers, Christie said: "I think it's safe to say they have spent a lot of money that we don't have." He said he expected to reduce the budget to $34 billion, "and maybe lower than that."

The budget includes a $2.8 billion contribution to the pension system for the fiscal year that begins July 1, plus $300 million Democrats are counting toward next year's payment but that actually comes from fiscal 2015 projected revenues.

A 2011 law that overhauled public employees' pension and health benefits required the state to contribute $3.1 billion to the pension system in fiscal year 2016, though the state Supreme Court essentially struck down that obligation this month.

Christie's office said the governor would take action on the budget on Friday.

Christie, who sources said will announce next week that he's running for president, had proposed a $1.3 billion contribution as part of a $33.8 billion budget in February.

In their spending plan, Democrats made up the difference by raising the tax rate on income exceeding $1 million from 8.97 percent to 10.75 percent, which they said would raise $690 million; increasing the Corporation Business Tax from 9 percent to 10.5 percent, which is projected to raise about $435 million; and anticipating $700 million more revenue than Christie is projecting this fiscal year and the next.

The so-called millionaires tax would sunset in four years, while the business tax hike would expire after one year.

The budget "makes the fiscally responsible decision that will restore confidence in New Jersey's finances," Senate Budget Chairman Paul Sarlo (D., Bergen) said on the floor before the 24-16 vote.

"The state should balance its budget and pay all of its bills, just like all of our taxpayers have to do," he said.

Christie said Thursday he would veto the millionaires tax.

In addition to funding the pension, the budget includes $7.5 million for family planning centers and money for a tax credit for the working poor, both of which Christie has vetoed in past years.

The Democratic budget built on Christie's proposal but departed on key points. Christie in February called for a new round of pension and benefit reforms, arguing the state could no longer afford the rising costs.

Based on the recommendations of a panel he convened to study the matter, Christie called for trimming health benefits to help pay down the pension system's $40 billion unfunded liability. And he recommended that lawmakers change the pension system from a defined benefit plan to a 401(k)-style plan.

None of this materialized, as public-sector unions and Democrats protested that Christie had reneged on his commitment to fund the pension system in fiscal years 2014 and 2015.

Democrats said the tax hikes were necessary to keep their commitment to the 2011 law, which required public workers and the state to contribute more toward the pension system. The state Supreme Court this month struck down a provision of that law that granted workers a contractual right to pension funding, giving Christie the authority to underfund the system.

Sen. Anthony Bucco, the top Republican on the budget committee, said the tax hikes could result in layoffs, increased costs to consumers, and less capital investment in New Jersey.

"These tax increase proposals will take money from the job creators that would otherwise be used to hire more workers, provide raises for hardworking employees, and offer valuable training for people in the workforce," Bucco said.

Democrats said the tax increases are necessary because New Jersey's economy hasn't grown as much as the state had projected. Republicans said new taxes would only further stymie the state's fragile recovery.

New Jersey ranked 46th in gross domestic product growth among the states in 2014, according to an analysis this month by the federal Bureau of Economic Analysis.

In accordance with Christie's recommendation, the Legislature also passed an amendment to the 2015 budget that adds $212 million to the pension system this year, on top of the $681 million the governor had already committed.

As scores of public workers looked on from the galleries of the two chambers, lawmakers debated whether the budget would actually help the pension system. Assemblyman Jay Webber (R., Morris) described the pension contribution as a "false promise" to public workers, because, he said, Democrats know that Christie won't sign it into law.

Yet he also agreed with some Democrats on one point: that the state's failure to fully fund the pension system "creates a breach of trust and suspicion of government." Webber suggested lawmakers should have worked to cut spending, rather than raise taxes, to fund the pension; Democrats countered that Republicans hadn't suggested cuts.

Assembly Majority Leader Louis D. Greenwald (D., Camden) said making the pension contribution was crucial to regaining the trust of public-sector unions. Democrats said this was a necessary first step in engaging unions in further talks on pension and benefit reforms.

"I will come across the aisle again," Greenwald said of working on pension reform.

Christie's commission has said that some of the pension plans are projected to run out of money within the next 10 to 12 years, given current funding levels.

Senate President Stephen Sweeney (D., Gloucester) said it was unreasonable of Christie to expect Democrats and labor leaders to discuss changes until the governor fulfilled his prior commitment to fund the pension.

"Who will come back to the table - who? - if it's a double pinkie swear, I'll do it this time?" Sweeney said at a Statehouse news conference Thursday morning.

Charles Wowkanech, president of the New Jersey AFL-CIO, added, "We're not coming back to the table to negotiate any more until you live up to your bargain."

Republicans indicated they would use the budget as a cudgel in November's Assembly elections, though they have little chance of taking control of the chamber.

"The Assembly Democrats are telling you we're going to raise your taxes by billions of dollars," Minority Leader Jon Bramnick (R., Union) told reporters. "The Assembly Republicans are telling you, we are going to embrace reforms so we make this state more affordable."

Labor leaders made a pledge to back lawmakers who fund the pension. Hetty Rosenstein, state director of the Communications Workers of America, told the news conference, "We will stand with the people who stand with us."