Cabinet Hopes Fizzling, Christie Faces State in Fiscal Crisis

  • Shunned by Trump and voters, governor must appeal to lawmakers
  • Downgrades, worst-off public pension may define legacy in N.J.

Trump Picks Mnuchin for Treasury, Ross for Commerce

Governor Chris Christie, scorned by New Jersey voters, seemingly had a political future working for Donald Trump. Now, with doubts he’ll join the president-elect’s administration, he’s pledged to finish his second term amid an unprecedented statewide financial crisis.

What awaits him is the nation’s worst-funded pension system, a credit rating battered by record downgrades and a forecast of higher unemployment. After his New Jersey policy-setting speech in January, he’ll have just 12 months to get the state in fiscal shape.

Chris Christie on Nov. 9.

Photographer: Andrew Harrer/Bloomberg

While three former associates await federal sentencing for their roles in the George Washington Bridge traffic scandal, lingering questions about the case have led to legislation calling for an investigation of Christie, 54, who was never charged. Meanwhile, his power base is eroding, with some of his Republican onetime allies, entering an election year, fallen away from a governor whose approval this month hit 20 percent, a record low.

“Given the overwhelming Democratic majority in both houses and his dismal approval ratings, it’s hard to see a scenario where his last year is a productive one,” said Assemblyman Jack Ciattarelli, 54, a Republican from Raritan who’s running for governor in 2017.

Course Changes

Christie’s plan was to be gone next year after winning the presidential election, but he never caught on in early voting states and ended his campaign in February. He endorsed Trump, 70, who named him transition chairman, only to be replaced by Vice President-elect Mike Pence on Nov. 11, three days after the election. Though Trump since has called Christie “very talented” and “really smart and tough,” it’s not clear whether he’ll have a role in the administration.

Christie, who hasn’t conducted a news conference since before the September start of the bridge-scandal trial, drew a crowd of media to the Statehouse Tuesday with a vague advisory about an “announcement” in the historic rotunda, topped by a gilded dome and surrounded by oil portraits of former governors.

He unveiled a $300 million renovation of the deteriorating Statehouse, declined to take questions and then chided the press for any anticipation that he would announce his resignation -- a rumor circulated on social media and stoked by his office’s refusal to provide any details beforehand.

‘Get Logical’

“I am completing my term,” Christie told reporters in Trenton. “Everyone should just get logical about this and lower the hysteria. If I were announcing that I was leaving to go to the Trump Administration would I really do it in the rotunda of the Statehouse, by myself without the person who would actually be giving me the job?”’

As Christie digs in, some Republicans in New Jersey are daring to leave his side.

In October, Kim Guadagno, his 57-year-old lieutenant and a potential Ciattarelli challenger, said she wouldn’t vote for Trump. Then she joined two Republican senators, Michael Doherty, 53, from Washington Township in Warren County and Kip Bateman, 59, from Branchburg, in an unsuccessful attempt to turn voters against a Christie-backed constitutional dedication of higher gasoline-tax receipts to transportation.

Tax Increase

Another Republican senator, Jennifer Beck, 49, from Red Bank, is co-sponsoring a bipartisan bill for a special prosecutor to investigate Christie for any ties to the George Washington Bridge scandal. She also had campaigned against a gas-tax increase that took effect Nov. 1.

Christie, who had signed a no-tax-increase pledge while running for president, agreed to higher fuel levies for New Jerseyans in exchange for relief elsewhere -- including the elimination of the estate tax and a gradual sales-tax cut. Moody’s Investors Service called the legislation a risk because it leaves the state short $1.4 billion for its annual budget.

“Although the renewed capital investment will benefit the state’s infrastructure and economy, the net effect of the revenue package is credit negative because it will strain the state’s operating budget amid rapidly rising pension contributions and below-average revenue growth,” wrote Baye Larsen, a Moody’s senior credit officer.

Record Downgrades

The state on Nov. 14 earned a downgrade, Christie’s 10th from the three major rating companies, as S&P Global Ratings cited the $135.7 billion pension shortfall. New Jersey in 2015 had the worst-funded public system among U.S. states, followed by Kentucky and Illinois, according to data compiled by Bloomberg.

“It’s a very rough time,” Democrat Jim Florio, 79, New Jersey governor from 1990-1994, said in an interview. “It’s not for me to be grading the governor, but objectively there are problems of a magnitude that I’m just not sure how you cope with.”

Christie, during his monthly radio call-in show, said that while pensions and benefits are the state’s biggest fiscal hurdle, he doesn’t expect a resolution by the end of his term.

“The next guy’s going to come in and say ‘Oh, we have this awful budget problem,”’ the governor said. “Well, I’ve been saying we have an awful budget problem for seven years."

Willem Rijksen, a spokesman for the state treasury, said New Jersey’s credit rating would have been even lower if Christie had not enacted benefits changes in his first term. The state “continues to increase its pension payments in a responsible manner,” including the largest contribution in state history -- $1.9 billion -- for fiscal 2017, he said.

Lame Duck

On Christie’s side is that he’s term-limited and “unencumbered by re-election,” according to Senator Joseph Kyrillos, a Republican from Middletown.

“He’s got the pen and he’s the governor,” Kyrillos, 56, said in an interview. “There are certain powers and abilities that come with his incumbency and no one should forget that.”

Though Christie scored national recognition for his first-term bipartisan pension changes that forced workers to retire later and pay more for benefits, Democratic leaders have refused to negotiate more concessions after he reneged on promised contributions.

On Nov. 21, the legislature unanimously passed a bill requiring quarterly pension payments, for savings of as much as $13 billion over 10 years.

Though its Democratic sponsor, Senate President Steve Sweeney from West Deptford, said he expects the governor to sign, Christie hasn’t said whether he will approve.

Over the next 10 years, New Jersey’s employment growth is expected to be 4 percent, well short of the 10 percent forecast for the U.S., according to a Nov. 18 analysis by the Rutgers Economic Advisory Service.

Unemployment that averaged 4.9 percent this year will rise to 5.4 percent in 2017, the service found. Also, wealthy residents may delay filing tax returns, anticipating a capital-gains reduction under Trump. That would put additional pressure on the state budget, which derives the greatest share of its revenue, an estimated $14.4 billion for the year that began July 1, from income taxes.

“This could be a really dismal year or two ahead,” Michael Lahr, director of the economic service, said at a conference in New Brunswick.

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