March 19 (Bloomberg) -- New Jersey Governor Chris Christie, who cut his revenue outlook for the past two years, is relying on a growth forecast more optimistic than those of all but eight U.S. states to pay for his record budget proposal.
While the second-term Republican projected a 5.8 percent climb in tax receipts for fiscal 2015, neighboring New York and Pennsylvania see a longer climb out from the 18-month recession that ended in June 2009.
Christie proposed increasing spending 3.5 percent to $34.4 billion for the year that begins July 1 to pay for soaring costs of health benefits, pensions and debt. The higher revenue forecast allows the potential presidential candidate to plan a budget without tax increases and service cuts.
“The economy is not growing anywhere near the 5.8 percent rate,” said Donald Boyd, a senior fellow at Rockefeller Institute of Government in New York. Christie’s targets “strike me as a bit optimistic,” he said.
Boyd isn’t the only one. Moody’s Investors Service, Standard & Poor’s and Fitch Ratings have all questioned Christie’s revenue targets.
Moody’s revised New Jersey’s outlook to negative in December, while S&P did in September 2012. All three companies have cut ratings on state debt one level since Christie took office in January 2010. New Jersey has a Moody’s grade of Aa3, and only Illinois and California have lower ratings among U.S. states.
Revenue has increased every year under Christie, though more slowly than he anticipated.
This fiscal year, major revenue sources climbed 5.3 percent through January, short of the 6.6 percent target in Christie’s budget, David Rosen, chief fiscal analyst for the Democratic-controlled legislature, said in a March 4 report.
Through December, the most recent month for which Christie’s administration released a revenue report, collections were about 3 percent short of his goal -- about $300 million. The shortfall for this fiscal year may be more than $400 million, Rosen estimated.
Christie has called Rosen, who has provided budget analysis to legislatures run by both parties for more than two decades, a “handmaiden” to Democrats.
Christie cut his 2014 revenue forecast by about $250 million in February. In 2013, his initial $31.9 billion projection fell short by about $500 million.
“The governor has done a lot of good things and he’s made tough choices, but the one area in which he continues to struggle with has been getting our budget to be structurally balanced,” said Senate Budget Committee chairman Paul Sarlo, a Democrat from Wood-Ridge.
Kevin Roberts, a Christie spokesman, said Treasurer Andrew Sidamon-Eristoff will speak about why the forecast outpaces neighboring states’ when he appears before the legislature for budget hearings.
Roberts said the budget year will begin with a $313 million balance.
“Rising costs in pension, health benefits, and debt service are monopolizing additional resources and crowding out support for those priorities that matter most,” Roberts said in an e-mail.
Christie, 51, has said 94 percent of his proposed new spending is for pensions, health care and debt service.
The state doesn’t have a “revenue problem,” Christie said in his 2015 budget summary. From 2012-2015, revenue will have increased by more than 6 percent annually, even as New Jersey cut taxes, according to the summary.
New Jersey ranked 33rd of all U.S. states and Washington in terms of economic health from the second quarter of 2009 to the third quarter of 2013, according to the Bloomberg Economic Evaluation of States. Its failure to recover as quickly as its neighbors has had Christie defending his job-creation policies, which include tax breaks and less business regulation.
Since February 2010, the state regained 120,200 jobs in private industry, about half those lost in the slump. New York added back all it lost by 2012. Democratic Governor Andrew Cuomo’s budget projects 4.3 percent revenue growth.
Pennsylvania, whose Republican Governor Tom Corbett is projecting 4.9 percent growth next fiscal year, had recovered 65 percent of the jobs it lost as of December.
The only states whose governors are expecting more revenue growth than Christie are California, Colorado, Idaho, Maryland, Nevada, Ohio, Oregon and Texas, according to an analysis of budget proposals.
As other states have newfound surpluses, “New Jersey’s reliance on overly optimistic revenue projections means the state continues to face a budget shortfall,” said David Rousseau, who was treasurer for Christie’s predecessor, Democrat Jon Corzine.
Rousseau, now budget analyst for New Jersey Policy Perspective, which focuses on public programs for low-to moderate-income residents, said revenue this year could be short more than $850 million if the current 3 percent gap holds.
Christie closed a hole last year in part by delaying property-tax rebates. Now, there is no such “obvious silver bullet,” Rousseau said in a Feb. 11 report.
Not all Democrats are as doubtful. Assembly Budget Committee chairman Gary Schaer, a Passaic Democrat, said New Jersey has tremendous potential.
“There is a lot of room for growth within the economy just by revisiting where we were six or seven years ago,” Schaer said. “It’s certainly within the assumed ballpark.”
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