Lost in the budget battle that shut down state government were the details of the $34.6 billion spending plan itself. All attention seemed to be focused on a controversial bill tied to the budget negotiations to restructure New Jersey’s largest health insurer, Horizon Blue Cross Blue Shield. And then the attention shifted, but not to the budget, rather to pictures of Gov. Chris Christie on the beach.
So here’s a look at what’s in New Jersey’s budget for fiscal 2018. Although total spending is roughly flat year-over-year, that’s because Christie and state Democrats moved the $1 billion-a-year state lottery out of the budget and devoted it to the pension system for public workers.
REVENUE: $34.7 billion
The state collects most of its money from three major taxes: the gross income tax ($14.3 billion), sales tax ($9.8 billion) and corporation business tax ($2.4 billion). The state cut the sales tax rate from 7 percent last year to 6.875 percent, and that rate will drop to 6.625 percent starting in January. Still, the state is budgeting slightly more revenue from the sales tax than it did last year.
SPENDING: $34.6 billion
Public schools get the biggest cut of the budget — more than $13 billion — and Democrats this year secured an extra $150 million above what Christie wanted. That includes $25 million for a preschool expansion and $25 million for special education. The budget also shifts $31 million in “adjustment aid” from some school districts considered overfunded and moves that money to schools with flat funding despite high enrollment growth in recent years.
The state will make a $1.5 billion contribution to the public worker pension system out of the budget. The state was supposed to put in $2.5 billion this year, but Christie convinced Democrats to go along with his plan to make the New Jersey lottery an asset of the pension system. So, $2.5 billion will still find its way into the pension system this year, but only $1.5 billion will come from the state budget, and the other $1 billion is expected to be generated by the lottery.
In exchange for passing the lottery plan and a watered-down Horizon bill, Democrats also got another $200 million added to the budget for programs they support, including $8 million for prisoner re-entry programs, $5.25 million for nursing homes and assisted living, $5 million for legal services, $2.8 million for to aid sexual assault victims and $2 million for cancer research, $20 million for cost-of-living increases for direct-care workers, among several other programs.
RESERVES: $408.9 million
The extra spending, though, leaves little money for the state’s rainy-day fund. The budget surplus makes up slightly more than 1 percent of spending and is at a 25-year low. Wall Street analysts routinely voice concerns about New Jersey’s thin reserve fund. By comparison, other states maintain rainy day funds of about 9 percent spending, according to a policy report released last month.
Christie promised to keep $325 million in extra spending Democrats wanted in the budget. He kept his word on that, but he still cut out some budget language that angered some Democrats, including Assembly Speaker Vincent Prieto.
Among Christie’s line-item vetoes, one eliminated a requirement that preschool expansion money be spent on districts with high concentrations of at-risk students, as Democrats intended. Another provision cut from the budget would have allowed households that qualify for food assistance to get a $21 per year energy assistance payment.
A potentially more consequential Christie veto will allow the state to divert millions of dollars from environmental remediation this year. That could include $175 million out of $225 million from the controversial contamination settlement with ExxonMobil. Democrats added budget language last month that would have limited such budgetary raids, but Christie’s veto kept in place a $50 million cap on how much money won from natural resource damage settlements can go into an environmental site cleanup fund.
Prieto has accused Christie of breaking his word, pointing to some public remarks Christie gave promising to sign the budget as passed by legislative committees in the Assembly and Senate if he got the Horizon and lottery bills.