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New Jersey Democrats May Thwart Christie’s Cuts in Second Half of His Term

Democrats who control New Jersey (STONJ1)’s Legislature may thwart parts of Governor Chris Christie’s agenda, including ending unused sick-day pay and teacher tenure, as he begins the second half of his term with near-record approval ratings.

The Republican has won passage of proposals to raise public workers’ costs for pensions and benefits and put a 2 percent cap on property-tax growth. Democrats, emboldened by victories in November’s elections, have vowed to fight harder against Christie, who they say has acted like a bully to get his way.

“This legislature is going to be publicly less cooperative,” said Brigid Harrison, a politics professor at Montclair State University. “Many Democrats were taken by surprise at the considerable momentum and force he brought to the office and they haven’t wanted to defy him in the court of public opinion. Now they’re going to be more wary.”

Even with Democrats hardening their opposition, Christie, 49, has remained popular in New Jersey and with Republicans out of state. He has 56 percent approval among voters and has been campaigning for presidential candidate Mitt Romney in Iowa and New Hampshire after spurning his own White House bid last year.

Christie, who was scheduled to make his second State of the State address today, postponed the speech after Assembly Minority Leader Alex DeCroce collapsed and died last night in the Statehouse.

Sick Pay

Christie last week declined to say what topics he’ll touch on during this year’s State of the State, though he said he may call again for action on ending payouts for unused sick-pay if lawmakers didn’t pass it in the lame-duck session that ended yesterday. Michael Drewniak, a spokesman for the governor, declined to comment on the speech.

In what may become 2012’s first showdown, Democratic legislative leaders said yesterday they have enough votes to pass a gay-marriage bill. Christie has said he supports the state’s civil-unions law, and believes marriage should be between a man and a woman.

A year ago, Christie used his first State of the State speech to urge lawmakers to “do the big things,” which he said were maintaining fiscal discipline, overhauling public education and reducing the costs of pensions and benefits.

‘Small Potatoes’

In recent weeks, Christie has toured the state to emphasize the costs to towns and taxpayers of giving government workers lump-sum payments for unused sick days. He has refused to accept Democrats’ compromise that would cap the payouts, not end them.

Such smaller battles, as compared with his pension changes that drew protests from thousands of workers outside the Statehouse, will likely be a bigger part of Christie’s agenda in the rest of his term, said Patrick Murray, a political-science professor at Monmouth University.

“He’s really staking out a claim on small-potatoes issues such as sick-leave payouts, which are important to his overall strategy, but are not really what he needs as far as accomplishments,” said Murray. “The political reality is that there’s a gubernatorial election coming up and members of the other party do not necessarily want to give him a victory.”

Education Proposals

Christie, after calling 2011 “the year of education reform,” was unable to win passage of measures to offer privately funded vouchers to students from poor families, institute merit pay for teachers and make it easier for administrators to fire educators deemed to be inadequate. He has promised to jump-start debate on the bills in 2012.

Speaking to reporters Jan. 4 in New Brunswick, Christie said he wouldn’t accept Democrats’ compromise on sick leave.

“You’re never going to get everything you want but you should never compromise your principles; this is a principle issue,” Christie said. “If I compromised on this, I would be violating a principle of mine.”

Christie, the first Republican elected New Jersey governor since 1997, saw his stature in the national party rise weeks after taking office in January 2010. He froze $2.2 billion in spending to close a midyear deficit, and then cut $10 billion in projected new spending for schools, pensions and towns. He sparred with teachers and other union members over benefits and pay, using YouTube videos of the battles to spread his message.

Benefits Changes

Democratic control of the Legislature forced Christie to compromise on the tax cap and benefits overhaul. Christie also was dealt a blow in November when his party failed to gain legislative seats, even after he campaigned for candidates and drew record out-of-state donations.

“That election proved a point,” Senate President Stephen Sweeney, New Jersey’s highest-ranking Democratic lawmaker, said in a Jan. 6 interview. “The governor went around in those competitive districts and said ‘this is all about me; please help me out.’ Everywhere he did that, he lost.”

Democrats’ victories didn’t hurt Christie’s popularity. Fifty-six percent of the state’s registered voters approved of him in a Nov. 16 Quinnipiac University poll, statistically unchanged from his high of 58 percent in October. Christie’s predecessor, Democrat Jon Corzine, had approval from 46 percent of voters at the midpoint of his term.

Economic Recovery

Christie may be benefiting from the state beginning to recover from the 18-month recession that began in December 2007. New Jersey’s unemployment rate, which trails the U.S. average, was 9.1 percent in November, down from 9.8 percent at the beginning of 2010. Still, that’s more than double the 4.5 percent rate four years earlier.

The Philadelphia Federal Reserve’s coincident index of New Jersey, a gauge of state-level economic conditions, has climbed 3 percent since Christie took office. The index is a composite of economic data, including nonfarm employment, the jobless rate, average hours worked in manufacturing and wages.

“He’s in a much better position than Corzine was, there’s no doubt about it,” said Peter Woolley, director of the PublicMind Polling Institute at Fairleigh Dickinson University.

Senate Minority Leader Tom Kean, a Westfield Republican, said Christie “has a good story to tell” in cutting spending and turning around the economy and needs to highlight that in the State of the State. Monmouth University’s Murray said Christie should plot out a clear course for how he will continue work on lowering property taxes and reining in the cost of government.

“He’s setting himself up for a potential battle with the Legislature, so he needs to lay right on the line that he’s going to be the one with taxpayers’ interests on his mind,” Murray said

‘Aggressive Assumptions’

New Jersey’s revenue collections for the first five months of the fiscal year that began July 1 totaled $7.65 billion, up 5 percent from the same period a year earlier. The total, though, is 1.9 percent below Christie’s projections.

Christie’s fiscal 2012 budget “relies on some relatively aggressive assumptions on both the revenue and expenditure side and could place additional pressure on the state if these assumptions do not materialize,” Standard & Poor’s said in a Jan. 5 report.

S&P cut its rating on New Jersey’s debt one step last February to AA-, its fourth-highest level, citing the state’s pension and health-care obligations. Moody’s Investors Service followed in April, and Fitch Ratings in August. Only California and Illinois have lower ratings.

Bond Market

Christie’s pension and benefit changes won’t prevent the need for increased state contributions, Fitch said. Other negatives for Fitch were an economic recovery that is lagging behind the nation, persistent deficits and high debt.

The extra yield investors demand to own a New Jersey general-obligation bond maturing in 2021 rated Aa3 by Moody’s and AA- by S&P instead of a top-grade tax-exempt security due in nine years fell to about 31 basis points on Jan. 9 from as much as 100 basis points in March, according to data compiled by Bloomberg. A basis point is 0.01 percentage point.

John Mousseau, portfolio manager at Vineland, New Jersey- based Cumberland Advisors, which oversees $1.2 billion in municipal securities, said he gives Christie “a solid B or B- plus.” While as a politician Christie needs to improve how he works with lawmakers, Wall Street has looked more favorably on New Jersey due to high incomes and confidence that Christie is beginning to get a handle on spending, he said.

“He’s installed a mindset of cutting costs which clearly was missing,” Mousseau said. “Has he turned the ocean liner around yet? No. Has he started maneuvering it to get it clear? Absolutely.”

Sweeney, of West Deptford, said Christie was able to secure early legislative wins because there was already support among top Democrats for overhauling pensions and benefits. The governor is going to have to abandon his inflexible approach if he wants approval for sick-time pay and tenure, Sweeney said.

“For the first half of his term, his agenda almost mirrored mine,” Sweeney said. “I’m not going out of my way to pick a fight, but we’re going to push our agenda and we’re going to do it hard.”

To contact the reporter on this story: Terrence Dopp in Trenton, New Jersey, at tdopp@bloomberg.net.

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

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