After three months of squabbling, Gov. Chris Christie, state lawmakers, local leaders and union officials remain locked in a battle over a plan for the state to rescue Atlantic City from financial collapse by having the state take over large parts of the local government. But even if the state Assembly breaks the stalemate and sends Christie a bill that would authorize the takeover he’s asking for, legal experts say the fight could continue in a different venue: a New Jersey courtroom. Labor unions and civil liberties groups are expected to file lawsuits challenging the takeover if it passes, arguing that it violates the state constitution by allowing the state to break union contracts and goes against provisions that say the state can’t actually run towns. Pat Colligan, president of the state Police Benevolent Association, said he expects to seek litigation if it comes to that. And Marc Pfeiffer, assistant director of the Bloustein Local Government Research Center at Rutgers University, suggested the unions might have a case. “There is a significant risk that parts of the takeover legislation could be deemed unconstitutional,” said Pfeiffer, a former deputy director with the state Division of Local Government Services. Christie’s office insists that the takeover would pass legal muster. “We have every confidence in the bills providing the tools we need to fix the city’s finances and that they are without a doubt legal and constitutional,” said Brian Murray, a spokesman for the governor. Christie said he isn’t concerned. Christie and state Senate President Stephen Sweeney (D-Gloucester) have said they will provide aid as long as lawmakers pass the takeover legislation, which would give the state broad powers over the local government for five years. One key power? The state would be allowed to break and renegotiate union contracts — a move Christie says is necessary because the city has been unable to reign in spending and bloated salaries.But while the Senate has approved the takeover, state Assembly Speaker Vincent Prieto (D-Hudson) has refused to allow a vote on it in his house because he said it trashes democratic principles such as collective bargaining. Experts note that the state constitution says the Legislature shall not pass any bill “impairing the obligation of contracts, or depriving a party of any remedy for enforcing a contract which existed when the contract was made.” Prieto on Thursday (Aprl 7) introduced a new bill that defies Christie’s call for a takeover. It would allow the city to try to reach benchmarks to receive aid, and if it doesn’t meet the goals within two years, tools similar to the takeover could be enacted-such as breaking contracts. But there is also concern among some Democrats that Prieto’s bill violates the constitution, as well, because it’s tailored to Atlantic City- even included the city’s name in its title. Assemblyman Ralph Caputo (D-Essex) suggested that the nonpartisan Office of Legislative Services examine both bills to see if they’re legal. Atlantic City Mayor Donald Guardian said this week he has “no doubt” the takeover is unconstitutional.
With a growing surplus and a modest growth forecast that lines up closely with the latest revenue projections from nonpartisan legislative analysts, the state budget seems to be in pretty solid shape heading into the next fiscal year. But that stability will face a strong test over the next few months as several big issues remain unresolved, including an elusive deal on state transportation funding and a looming court decision that could further weaken New Jersey’s public-employee pension system. Those concerns and others are giving lawmakers much to worry about as they start to dig deeper into Gov. Chris Christie’s $34.8 billion proposed spending plan in advance of July 1, the deadline that’s set in the state constitution for a new budget.
But the two quickly got down to business, with Sarlo pressing the acting treasurer on a number of the state’s most pressing budget issues, including the lack of a concrete plan to renew the state Transportation Trust Fund. The state has been spending more than $3 billion annually – counting federal matching funds — on road, bridge and rail-network improvements. But the trust fund will run out of money at the end of June unless a new source of revenue can be found. Christie’s proposed budget includes only a placeholder that assumes there will be $1.6 billion available for transportation spending. Democrats have called new borrowing and increasing the state’s gas tax, but so far Christie has yet to agree with them. Part of a potential deal that has emerged has been a proposed trade-off of new revenue from the gas-tax hike sought by Democrats for a phase-out of New Jersey’s estate tax, which is something that Republican lawmakers have long sought. Lifting the state income-tax exemptions on retirement income from pensions and 401(k) plans could also be part of a deal, along with allowing charitable contributions to be deducted from state income taxes.
Spending on public-employee benefits may not be the biggest single item in the state budget, but it’s definitely one of the most controversial. The growing amount of money the state plans to dedicate to healthcare and pension benefits for state workers during the next fiscal year was hotly debated throughout a daylong Assembly Budget Committee hearing held in Trenton yesterday. Republicans complained that the state is spending so much now on worker healthcare and pensions that there are few dollars left for other top priorities like education. But Democrats on the panel said Gov. Chris Christie is still shortchanging the state pension system, and they also raised concerns about loosely defined savings from employee healthcare changes that the governor is banking to balance his proposed budget for the next fiscal year.
Christie’s proposed $34.8 billion budget would increase state spending by about $1 billion. Roughly 80 cents out of every dollar in new spending would go toward employee pensions and healthcare. That includes a $555 million increase in funding for the state’s grossly underfunded pension system. To address employee-benefit costs, Christie has called for a new round of benefits changes in the wake of a bipartisan reform law passed in 2011. He wants to freeze enrollment in the current pension system and force employees to accept less generous healthcare plans. Democratic legislative leaders, meanwhile, are backing a constitutional amendment related to pension funding that could go before voters this fall. The amendment would require the state to make pension contributions equal to the full amount calculated by actuaries, and to make those payments on a quarterly basis instead of all at once at the end of each fiscal year.
The Legislature yesterday gave final approval to a bill that would allocate more than $140 million to fund long-stalled open-space and farmland preservation projects, setting up a possible confrontation with Gov. Chris Christie. The bill (S-969) easily passed without debate in the Assembly, but it differs in one key aspect from how the governor wants to spend money from a 2014 ballot initiative that authorized using a portion of corporate business taxes for land-preservation program. But in his proposed budget, Christie wants to use approximately $20 million out of the program to pay for salaries and maintenance at state parks, an allocation not included in the bill approved by lawmakers. The governor pocket vetoed an identical open-space measure this past January at the end of the lame-duck session, although he did not cite any specific reasons for not signing the bill. Some lawmakers oppose the diversion, saying it was not what voters approved when they passed a constitutional amendment dedicating a portion of corporate business taxes for open-space purposes. Many conservationists and the New Jersey Farm Bureau, which had lobbied hard for passage of the ballot question, share that view. The initiative establishes a permanent funding source for land preservation instead of relying on state bond issues every few years.
Other than the diversion of $20 million for salaries and maintenance at state parks, the bill would mark the first allocation from the new fund since it was passed a year-and-half ago. Even so, it still would provide less money for preservation programs, including historic structures, than was typically handed out to counties, local governments, and others in the past. It was not unusual for as much as $200 million a year to be spent. The bill, approved in a 53-16-3 vote, would lay out a spending program allocating about $80 million in next year’s budget and another $66 million in yet-to-be allocated money from the previous year. With less money available, the legislation caused further division in the typically fractured environmental community as to how the money should be spent. Some criticized the lack of any funding set aside for Blue Acres, a program that buys up flood-prone properties from owners who are willing to sell. Others objected to nonprofit groups getting grants for stewardship of open space and other lands. Under the bill, the bulk of the money would go to the state’s Green Aces program (61 percent), which funds open-space acquisition and park development. Thirty-one percent would be used for farmland preservation and 5 percent for historic preservation.
The ranks of New Jersey wealthy taxpayers are growing, not shrinking, according to the nonpartisan Office of Legislative Services, which was pulled into the fight over the estate tax Wednesday. Income statistics in OLS’ budget analysis contradict some claims that New Jersey is losing its wealthiest residents (despite actually losing its wealthiest resident). While Gov. Chris Christie’s state budget does not eliminate the estate tax, the fervor surrounding its proposed phase out was prominent in state Senate and Assembly budget committee hearings this week as lawmakers jockeyed for budget data to back them up. New Jersey is one of two states to levy estate and inheritance taxes, and its $675,000 exemption is far below the federal level. Proponents of phasing out the estate tax say it’s driving wealthy residents out of New Jersey, while opponents call it a gift to the very rich.
Lawmakers are pushing bills to eliminate the estate tax and raise the exemption on the retirement income tax. The Senate Budget and Appropriations Committee in February approved a bill to eliminate the tax by 2021. Assemblyman Anthony Bucco (R-Morris), who has introduced legislation to match the federal exemption, said Wednesday that “from the numbers I’ve looked at, is that we have had growth in the lower- to middle-income residents in New Jersey, and not necessarily an expansion in that higher end, that upper end.” But studies actually show lower- and moderate-income residents are leaving, while the number of tax returns filed by top income earners is rising, Catherine Brennan, chief of Revenue, Finance and Appropriations at OLS, told Bucco and the Assembly Budget Committee. “That would suggest that New Jersey is generating millionaires and the number of tax returns at the high end is actually increasing,” she said. Forty-nine thousand taxpayers with income greater than $500,000 filed tax returns in 2012, the most recent year data was available, compared with about 20,000 in 1997, according to the state’s annual Statistics of Income report. The 49,074 tax returns from people with more than $500,000 in income in 2012 was an all-time high, OLS said in its analysis. Meanwhile, tax returns filed by taxpayers with income less than $50,000 fell about 28 percent. Wealthy residents’ income, too, was gaining. Taxable gross income from people making over $1 million rose 179 percent from 1997 to 2012, with an annual average increase of about 7 percent per year. Christie’s budget includes $849 million in expected revenue from the estate and inheritance taxes next year. The estate tax accounts for about half.