Christie’s Budget Woes May Hurt More Than a Scandal

Mr. Christie was asked at a Republican Governors Association news conference on Wednesday whether he would step down as the group’s chairman — as he had been asked five months ago because of the scandal surrounding the lane closings to the bridge. This time it was about his state’s economic woes, at a time when the group is trying to argue that Republican governors are more responsible financial stewards.

Appearing at a fiscal conference last week, the day after Moody’s Investors Service issued the sixth downgrade for New Jersey, Mr. Christie found himself defending his economic record in an interview with Bob Schieffer of CBS News. “It was not so long ago people were talking about the New Jersey miracle,” Mr. Schieffer said, adding, “But now suddenly the news is not so good about New Jersey.”

If the governor might have cast aside the bridge scandal as minor — “a footnote” in his legacy, he told Mr. Schieffer — the problems of the economy would seem to say more about the job he has done as governor as he pushes ahead with plans to run for president in 2016. It might have been easy to dismiss the bridge scandal as manufactured by Democrats looking to score points; it will be harder to dismiss concerns about his financial management, particularly among primary voters who consider themselves fiscal conservatives.

Mr. Christie is not the only one to blame for the fiscal problems. He argues that he is making the best of bad choices handed to him by previous governors who failed to pay the annual pension obligations. The ratings agencies, Mr. Christie said on Wednesday, “downgrade people who continue to act responsibly.” The other options for balancing the budget — cutting aid to hospitals, schools or higher education — could have caused as much or more outrage.

Mr. Christie argued that the problem with the pensions would not be solved until public employees contributed more toward soaring health care costs.

“I’d love to give people tax relief,” he said, announcing his plans to fill the budget gap on Tuesday. “I’d love to also be able to fund programs that are priorities and that matter a great deal to me and to the people of this state. But until we decide to be adults and deal with the problem we know we have, we’re not going to be able to do that.”

On Wednesday afternoon, when asked at a news conference in Trenton whether he was “nervous and intimidated” by the prospect of lawsuits from unions who have vowed to sue to force him to make the payments on public employee pensions, Mr. Christie deadpanned: “Two words that are often associated with me, ‘nervous and intimidated.’ Listen, I know that some people think that now’s the time where you can pile on. You know, I make the decisions that I believe are the right thing to do.”

“I didn’t think it would happen this quickly,” the governor added, referring to the hole the pension payments had created in the budget.

But a host of independent reports and the ratings agencies have warned about the problems for years: The governor’s projections for economic growth have been too optimistic, resulting in midyear cuts to the budgets three years in a row. He has not kept enough of a cushion against bad economic news — the state’s surplus is about 3 percent of the total budget, the lowest in a decade, and below the median for other states, at 5 percent. Connecticut, for example, was like New Jersey in suffering lower than expected tax revenues this year, but was not forced to adjust the budget because it maintains a bigger rainy day fund.

The ratings agencies have warned that his reliance on “one shots” to fix budget holes — a practice Mr. Christie himself railed against when he ran against Gov. Jon Corzine in 2009 — was making the budget structurally unsound, and that he would have to either raise taxes or cut programs to restore health.

“This has been a multiyear trend that has now reached a very weak position,” said Baye B. Larsen, who wrote the report that accompanied the Moody’s downgrade.

Mr. Christie was widely praised in 2011 when he and Democratic leaders in the Legislature agreed to increase payments on the state’s pension obligations, which had been almost entirely ignored by governors since Christie Whitman. (Mr. Christie told Mr. Schieffer that Mr. Corzine made “zero” payments; in fact, he paid as much or more than Mr. Christie for two years, then reverted to the previous model when the recession hit.)

In return, employees had to contribute more toward their benefits, and won the right to sue if the state reneged on its payments. It made him seem the adult on the national stage, daring, as he said, “to touch the third rail of politics in order to bring reform to an unsustainable system.” This year, the payment was to be $1.6 billion; Mr. Christie said this week he would pay $696 million. In the fiscal year that begins July 1, he was to pay $2.25 billion; he will pay $681 million.

Paul A. Sarlo, a Bergen County Democrat who is chairman of the budget committee in the State Senate, argued that the governor had failed to make tough choices, instead basing his budgets on unrealistic expectations for tax revenue.

“He blamed the pension payment for his fiscal troubles, but conveniently left out the fact that his revenue projections collapsed as most predicted,” he said. “He should stop blaming the one group who has actually made sacrifices to help solve the state’s budget problems and point the finger back at himself.”

Cutting the pension contributions will add $2 billion to the unfunded liability in the system. And the credit ratings will make it harder for the state to borrow money.

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