Christie Denies New Jersey Taxpayers $3.4 Billion Insisting Money Is Saved

New Jersey Governor Chris Christie, who says he’s trying to save money for residents with the highest U.S. tax burden, may cost them $3.4 billion in federal funding that would have improved schools and eased congestion.

The first-term Republican this month halted the nation’s largest mass-transit project, a tunnel under the Hudson River, saying residents couldn’t afford overruns on its $8.7 billion cost, even with the federal government pitching in $3 billion. In August, Christie’s administration lost $400 million in U.S. education funds because of an error on a grant application.

Christie is campaigning to fix the finances of a state that has battled nine straight deficits and a $46 billion underfunding of its pension system. He has slashed aid to towns, trains and schools and criticized public-employee unions. The 48-year-old former prosecutor has become a Republican star, campaigning for candidates in Pennsylvania, Connecticut and Maryland, and won a Virginia Tea Party straw poll for president.

“How many times will the people of New Jersey lose out on federal money so that our governor can score political points?” Senate Majority Leader Barbara Buono, a Metuchen Democrat, said at an Oct. 19 rally of more than 200 construction workers at the tunnel site in North Bergen.

Christie has said overspending led to the budget crisis. He faced a record $10.7 billion deficit this fiscal year, more than a third of his $29.4 billion budget. The governor said he is being responsible by not allowing the state to foot the bill for overruns on the Hudson River rail tunnel, whose cost may balloon to $14 billion.

Two-Week Delay

The governor killed the project Oct. 7, and then agreed to delay a final decision until tomorrow, at U.S. Transportation Secretary Ray LaHood’s request. Christie told reporters Oct. 18 he was content to walk away from the tunnel unless someone else agrees to pay for cost overruns. He said today he hasn’t reversed his decision.

“I don’t care how much people want a tunnel to New York, we don’t have the money for that,” Christie said at a town-hall meeting in Scotch Plains. “Here’s the promise I will make, I’m not going to stick you with that bill.”

Biggest Project

The tunnel is the nation’s most important infrastructure project measured by the number of passengers who would use it, said Robert Yaro, president of the Regional Plan Association, a New York-based transit-advocacy group. Yaro and Martin Robins, the project’s original director, who now heads Rutgers University’s Alan M. Voorhees Transportation Center in New Brunswick, said they’ve never heard of any state turning down that much federal money.

About $600 million has been spent on the project, which broke ground last year under former Governor Jon Corzine, 63, a Democrat.

“It’s unparalleled, and it is very troubling,” Robins said. “It seems to me it is on the verge of recklessness.”

National Campaign

Democrats, who control the state Legislature and New Jersey’s two U.S. Senate seats, have called Christie’s move one of the worst a governor has ever made. Assemblyman John Wisniewski, chairman of the Democratic State Committee, said Christie is acting to gain fame at the expense of New Jersey.

“Chris Christie is pursuing a rigid conservative agenda and hurting New Jersey residents, all so he can enjoy national media attention,” Wisniewski said in an Oct. 19 e-mail to supporters.

Wisniewski, who also heads the Assembly transportation committee, said Christie’s real motive for halting the tunnel is to free money for the state’s depleted highway fund and avoid raising the 10.5-cents-per-gallon gasoline tax. Christie has said the tunnel and road-fund issues are separate.

The tunnel decision came the same day that Christie’s ousted education commissioner, Bret Schundler, 51, testified to state lawmakers that New Jersey lost the U.S. Education Department’s Race to the Top competition partly due to the governor. Christie didn’t want to be seen as surrendering to the teachers union in a dispute over whether performance should matter in job cuts, Schundler said.

Teachers Union

Christie scrapped a compromise that won the New Jersey Education Association’s endorsement of the bid after a radio host accused him of “caving in” to the union, Schundler testified. That failure to agree with educators cost New Jersey at least 14 points of the 500 possible in the competition, said Schundler, a former Jersey City mayor and two-time Republican candidate for governor.

The governor “said that the leaders of the NJEA had demeaned him and that it was utterly intolerable for him to be viewed as having given in to them; the money was not worth it,” Schundler said in a written copy of his testimony. He didn’t return phone messages left at his home.

Schundler has acknowledged making an editing mistake that cost the state 4.8 points on its application. New Jersey lost by 3 points, which let Ohio qualify as the last of 10 states to win a share of the grants. Christie fired Schundler after the error, saying Schundler misled him.

Salary Costs

Christie has said reducing school pay and administrative costs would help control property-tax bills that averaged $7,281 last year, the highest in the nation.

Teachers in the state received an average salary of $63,111 in the 2008-2009 school year, compared with the national average of $54,319, according to data from the National Education Association. New Jersey’s state and local tax burden is also the highest, with residents paying 11.8 percent of their income in 2008, according to the Washington-based Tax Foundation.

Christie has said he won’t raise taxes to help close a deficit that the nonpartisan Office of Legislative Services has projected may be as high as $10.5 billion next fiscal year. The governor plans to lower New Jersey’s income taxes during his term, as he continues to reduce state spending.

The original tunnel agreement that Christie rejected called for the federal government and Port Authority of New York and New Jersey to each give $3 billion, and New Jersey to pay $2.7 billion, plus any overrun costs.

For Decades

State and federal officials have been discussing the tunnel for decades. The 8.8-mile (14.2-kilometer) conduit was meant to double the number of commuter trains to New York during peak times. It would reduce round-trip commutes by as much as 30 minutes, and boost the value of homes near transit stations by $18 billion, according to the Regional Plan Association.

Christie said he doesn’t want a repeat of Boston’s Big Dig, the most expensive public-works project in U.S. history. The work, which replaced an elevated highway with tunnels, was estimated to cost $5 billion when ground was broken. It tripled to $14.8 billion after overruns and structural problems.

Christie is making tough decisions to fix the problems created after eight years of Democratic control of the governor’s office, said Assemblyman Joseph Malone, a Republican from Bordentown in central New Jersey.

“Somebody has to take charge, and that someone’s going to get criticized,” Malone said in an Oct. 18 telephone interview.

Malone said he has heard little outrage outside the tunnel area over Christie’s decision to kill it. Malone said his constituents would rather their governor use financial prudence.

A Commuter’s Stand

Concern over budgets prompted Moody’s Investors Service to put a negative outlook on the state’s Aa2 rating, the third highest, in September, according to the company. New Jersey’s 10-year bonds traded to yield 38 basis points higher than generic AAA-rated general obligation bonds, according to data compiled by Bloomberg, as investors want a premium for the debt. The state’s yield was as much as 64 basis points above generic bonds Sept. 9, the data show. A basis is 0.01 percentage point.

Fifty-one percent of New Jersey voters approved of Christie in a poll of 831 registered voters conducted Oct. 4-10 by Fairleigh Dickinson University’s PublicMind. The poll, which had an error margin of 3.5 percentage points, was his best measure since early March. That was before he proposed a budget that cut $1.2 billion in aid to towns and schools. New Jersey Transit in May raised fares an average of 22 percent after Christie cut the agency’s state subsidy to fill a budget hole.

“I understand about budgets and how the economy is tight, but you have to look into the future,” said Newell Anderson, 55, a registered Republican from Princeton who has faced a “commute from hell” on trains to New York this year.

“I’m paying $425 a month to stand all the way to New York?” Anderson said. “I’ve got a problem with that.”

To contact the reporters on this story: Terrence Dopp in Trenton at tdopp@bloomberg.net; Dunstan McNichol in Trenton, New Jersey, at dmcnichol@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

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