The Assembly Budget Committee took testimony from Budget and Finance Officer David Rosen of the non-partisan Office of Legislative Services as well as the Treasurer Andrew Sidamon-Eristoff March 30 on the proposed FY2016 budget. In comparison to year’s past, at least with regard to state revenue projections, there was little disagreement. But, while that door remains closed this year, lawmakers still had questions about funding for property tax relief, pensions, and transportation fund.
The Assembly Budget Committee’s members questioned Treasurer Andrew Sidamon-Eristoff on property tax relief funding, public-employee pension contributions, and the stability of transportation spending included in the $33.8 billion budget Christie has put forward for the fiscal year that begins July 1. They also wanted to know more about fees paid to outside pension fund managers and the impact of recent credit-rating downgrades.
The hearing yesterday was the first in a series that lawmakers will be holding in Trenton as they evaluate Christie’s budget in advance of a July 1 deadline set in the state constitution for adoption of a balanced spending plan. Both men are scheduled to appear before the Senate Budget and Appropriations Committee March 31.
David Rosen, the veteran non-partisan legislative staffer who analyzes the budget and the annual revenue forecast, indicated as the day began that his office’s own revenue projections were nearly identical to Christie’s for the next fiscal year, calling them ‘analytically trivial.’ OLS and the Administration both came out with revenue growth of 3.8 percent—the closest they’ve been to each other’s estimate in 21 years.
That’s a huge change from prior years, including in 2012, when Christie called Rosen the “Dr. Kevorkian of the numbers” for putting forward a much less rosy forecast than the governor had at the time as he was trying to make the case that New Jersey could afford an across-the-board income-tax cut. Rosen’s projections ended up being far closer to actual tax collections than the Administration’s.
Overwhelming, that agreement set the stage for the Treasurer during his several hour discussion with the Legislature in defense of the Administration’s budget plan for next year. The budget is generally flat – keeping school and municipal aid flat.
The Cost of Borrowing
There was some discussion about debt. With Committee chairman Gary Schaer asking about taking on new debt and debt service cost in light of New Jersey’s bond rating (two ratings agencies cut New Jersey’s credit twice last year amid a $1 billion revenue shortfall, with another reducing the rating once – have led to increased borrowing costs).
“So the anticipation is that you’ll be borrowing in 2016 an additional 2.6 billion,” Schaer asked. “Right, which is a little bit less than we borrowed in the past,” said State Treasurer Andrew Sidamon-Eristoff.
Sidamon-Eristoff insisted the state’s credit is good.
“We have enjoyed extremely strong market reception when we’ve gone into the markets. I think we’ve done better than our ratings would suggest,” said Sidamon-Eristoff.
Transportation Trust Fund Woes
Committee vice-chair John Burzichelli asked about the status of the Transportation Trust Fund, , a subject that has received a lot of attention as the current source of revenue for the fund — tolls and the state’s 14.5-cent gas tax — will only raise enough money to go toward paying off the fund’s $18 billion debt later this year.
Last week Governor Christie used the number $1.6 billion.
“We are currently spending $1.6 billion a year on infrastructure, matched by $1.6 billion a year in federal money. That’s $3.2 billion a year that we’re spending on roads, and bridges and mass transit every year. We’re not bankrupt — it’s funded through 2016,” Christie said at last week’s town hall.
Eristoff used a smaller number — 1.1. billion — but made the same point. And that point, was partally supported by Rosen who indicated that the fund would make it thru 2016 but that the issue would need to be addressed sooner than later.
Rosen explained to lawmakers during his morning appearance that funding for the next year has been “cobbled together” with borrowed money and funds from other sources, like a repaid loan to New Jersey Transit. But he made clear there’s no additional cash or other source of transportation fund revenue established yet for the fiscal year that begins July 1, 2016.
“We can squeeze through (fiscal year) 2016, but if 2016 goes forward as laid out in the budget, we begin (fiscal year) 2017 with no cash balance and no source of revenue to pay for the unfinished projects,” he said.
In comparison, Sidamon-Eristoff painted a somewhat different picture with the same facts.
“There is no proverbial sword of Damocles hanging over the state’s transportation program as of July 1, 2015,” Sidamon-Eristoff said.
“This year you’re telling us the world is not ending. I don’t disagree with that, I don’t think the world is ending, but it looks like this money is pieced together in a way that is different than what the governor spoke about when he presented his plan to the state on Jan. 6, 2011,” said Vice Chair Assemblyman John Burzichelli.
Assemblyman Gordon Johnson asked about the large fees generated for investment houses that handle the state’s pension money.
“Could you explain why that number is so high, $600 million for fees,” Johnson asked.
Eristoff said the press has completely distorted that issue.
“Quite to my mind, this impugns the reputation of our professional staff and of those good people who agree to serve on the state investment council for no compensation whatsoever and I think that everyone needs to know — the public especially — needs to know that we are in very, very good hands and that we run a very tight ship and we should be proud of that,” said Sidamon-Eristoff.
Assemblyman Troy Singleton asked about Judge Mary Jacobson’s order that the state put another $1.6 billion into the pension system for this year alone.
“At this point has the administration developed a contingency plan to address the $1.6 billion judgment that we know has already been adjudicated, is there a contingency plan in place currently,” asked Singleton.
Eristoff said no, because the state is appealing the ruling and there is no money available.
“I think you’ll appreciate how difficult it would be to try and identify $1.6 billion of resources in the remaining months of the current fiscal year,” said Sidamon-Eristoff.
But pressed by Singleton further for evidence of any planning, the treasurer said he has engaged with legislative leaders and has begun talking about where there may be “unspent balances and the like.”
Also discussed by Singleton was the proposed budget's inclusion of a 10-year phase-up of the required pension payment in comparison to any items articulated by the Governor's Pension & Health Benefit Study Commission (Want Details on the Report of the NJ Pension & Health Benefit Study Commission?, February 26, 2015) such as a cut over to a defined contribution rather than defined benefit plan.