FY 2011 Budget Solutions: Fundamental Reform to Rebuild New Jersey’s Economy

Trenton, NJ – Faced with the daunting combination of a soaring deficit years in the making and the continued effects of the national recession, Governor Chris Christie today proposed a $29.3 billion state budget that fundamentally alters spending habits while preserving core services and social safety nets and advancing fiscal reforms to put New Jersey back on the path to prosperity.

Chief among the Governor’s proposed reforms – to shield taxpayers from excessive local spending and tax increases – is a constitutional amendment to impose hard caps of 2.5 percent on municipal, county and school district property tax increases. Combined with other reforms, including those planned for public employee pension and health benefits, Governor Christie is providing municipalities and school districts a tool kit of reforms to control spending and property taxes.

“It is time for every level of government to accept the severity of our fiscal problems, understand and take responsibility for what got us here, and resolve to fix the problems through a fundamental shift in priorities and thinking,” Governor Christie said. “It will not be easy, and it will certainly make some people unhappy. But the alternative – more budget tricks and gimmickry to mask our fiscal problems – risks leaving our children and our children’s children with a legacy of crushing debt and economic decline.”

Governor Christie’s Fiscal Year 2011 Budget proposal, as announced today before a joint session of the Legislature, cuts spending across hundreds of state programs and operations, reducing the current year anticipated state-supported spending of $29.86 billion by $1.6 billion or 5.3 percent. It is also $2.9 billion or 8.9 percent less than the adjusted FY 2010 appropriation of $32.1 billion, when non-recurring federal stimulus funding is included.

From a full-funding starting point, all reductions amount to more than $10.73 billion, illustrating the severity of the structural budget deficit that resulted from the relentless expansion of state government over the last decade. Debt growth has accelerated under the crushing, cumulative weight of our overgenerous pension and benefits obligations, aid increases to municipalities and schools have flowed without reform, and the chronic use of debt and non-recurring funding sources have hobbled the budget balancing process.

Even under these enormous fiscal pressures, the budget proposal strives to protect those who are most in need. The budget:

• Preserves the health care safety net by increasing hospital Charity Care from $605 million to $665 million;

• Continues enrollment and benefits for all eligible children into both Medicaid and NJ FamilyCare;

• Preserves access to medications for seniors by maintaining program eligibility for prescription drugs;

• Expands the food stamp program to 185 percent of the federal poverty level;

• Continues to maintain funding for welfare grants to families; and

• Keeps New Jersey parks and beaches open.

The budget proposal reforms and converts the Homestead Rebate Program into a direct property tax credit that ends the costly and fiscally irresponsible practice of borrowing more than a billion dollars each year to send out checks.

School and Municipal Aid

Closing the funding gap, however, still meant extremely difficult choices that will impact funding to municipalities and schools. Nonetheless, Governor Christie seeks to implement meaningful reforms that will blunt the impact of these aid reductions.

Faced with the loss of more than $1 billion in federal stimulus funds used as one-time funding for education, this year’s spending plan dedicates nearly $70 million more in state funds to education aid than last year. Still, the use of stimulus funds last year without a plan for replacing that funding means New Jersey school districts will face a net reduction of $820 million. Great care was taken to ensure that no one school district would lose more in formula aid than 4.99 percent of its original Fiscal 2010 budget.

The proposed budget finds savings from a $446 million reduction in municipal and county aid. The municipal aid decline was filtered to ensure that communities would see no more than a $250 increase in local property tax bills. At the same time municipalities, local school districts and higher education institutions will be given a Tool Kit of mandate relief and regulatory flexibility that includes:

• Constitutional caps on spending and local taxes,

• Pension and benefits reform,

• Civil service reform,

• Collective bargaining reform, and

• Management reform

Budget savings totaling $2.85 billion appear across virtually every state program and department and the Legislature. To balance the budget, the Administration also had to forgo a more than $3 billion contribution to the state’s defined benefits plan. These are not choices the governor wants to make, but tough medicine is needed because the disease is so severe.

“There is no sugar-coating this budget,” said Governor Christie. “It is a painful but vital step vital if our state is to regain its financial and economic footing. We are truly at a crossroads. We must make the right choices, come together and act decisively at this place in time or forfeit an opportunity that may never come again. We cannot allow a lack of vision, courage or political will to supplant the responsibility we owe to our citizens and our children.”