TRENTON - Legislative leaders introduced a $32.9 billion state budget Thursday that would hold education funding flat, boost spending on medical services for lower-income people, and closely track with the fiscal plan Gov. Christie unveiled in February.

The budget, the product of talks between Democrats who control the Legislature and the Republican governor's staff, mirrors the straitened times facing the state.

Revenue has gradually improved, as has employment, but not at a robust pace. Yet fixed costs for pensions and other state government responsibilities continue to grow.

"I don't want to sound like the cranky guy at the party, but we are going to continue to have tough budgets," said Sen. Jeff Van Drew (D., Cape May).

The Senate and Assembly budget committees passed the budget Thursday. Both houses are expected to take up the measure Monday.

"This is a reasonable and responsible fiscal plan for New Jersey that reflects the difficult economic conditions that continue to require hard decisions on state finances," said Senate Budget and Appropriations Committee Chairman Paul Sarlo (D., Bergen). "This budget makes the best use of available resources by meeting the state's priorities."

The budget would grow 2 percent over the current fiscal year, which ends June 30. It includes no appropriation for special primary and general elections to fill the seat of U.S. Sen. Frank R. Lautenberg, who died June 3.

The cost of those elections will total an estimated $24 million.

By far the budget's biggest increase would be for Medicaid, which will expand by about 200,000 new enrollees when the program becomes effective Jan. 1. The state will get about $1 billion in additional federal money for the program to cover the cost of providing health coverage to people who previously earned too much to qualify for Medicaid but not enough to buy health insurance on their own.

Much of that will cover the cost of expansion, but because of a quirk in the law it will also cover about $200 million of Medicaid costs the state currently pays for.

The budget still counts on more than $150 million collected from developers by municipal governments for housing for low-income people and the disabled the administration says rightfully belongs in the state Treasury. The state Council on Affordable Housing, which oversees the program, wrote municipal governments in May demanding that they turn over the money.

The agency cited a 2008 law signed by Gov. Jon S. Corzine requiring that municipal governments hand over money that had been collected but not yet committed to specific programs.

The effort to collect that money is the subject of court challenges, however, and it is not clear how soon or even whether the administration will have access to the money.

The proposed budget adopts the Christie administration's revenue projections, although legislative Democrats earlier called those projections unrealistic. At a Senate budget committee hearing in May, Democrats essentially endorsed projections by the state Office of Legislative Services, a nonpartisan legislative agency that analyzes legislative and policy issues, that revenue collected in the 2013 and 2014 budget years would fall short by $700 million or more.

The Christie administration disputed those projections, and on Thursday Democratic legislative leaders essentially accepted the administration's forecast.

Sarlo said that it was the state treasurer's responsibility to certify revenue. If the budget falls short, it will then be the Christie administration's responsibility to find corresponding cuts.

The budget unveiled Thursday was criticized by the New Jersey Working Families Alliance, a liberal advocacy group, which alleged that it favored the affluent over the less well-off.

"Unfortunately, the budget bill largely resembles the governor's proposal from February," said Bill Holland, director of the group. "Corporations and people making more than $400,000 per year are paying less in taxes than they did in 2009, while many people making less than $45,000 per year are paying more."

In an apparent concession to Democrats, the Christie administration added several spending items not included in the original proposal.

They include $3 million in additional money for county colleges and $10.3 million for nursing homes and other extended-care facilities. The budget also includes $30 million to help underwrite the merger of the state School of Osteopathic Medicine in Stratford into Rowan University, effective July 1.

The budget also puts to rest for now a proposal by the governor to allow taxpayers to take a credit on their state income tax bill for some of what they pay in property taxes.

Democratic leaders apparently nixed that plan, arguing that the state lacked the money to pay for it, and any additional discussion of the measure likely will occur only in the context of this year's gubernatorial election between State Sen. Barbara Buono (D., Middlesex) and Christie.

Two Senate Democrats on the budget committee voted against the proposal Thursday, Loretta Weinberg of Bergen County and Nellie Pou of Passaic County. Both said the budget would fail to pay for important social programs or provide money to homeowners to offset property taxes.

Contact Chris Mondics at 609-989-9016 or cmondics@phillynews.com
Inquirer staff writer Matt Katz contributed to this article.