- Associated Press - Friday, June 26, 2015

TRENTON, N.J. (AP) - Four days before he’s expected to launch his presidential campaign, Republican Gov. Chris Christie signed a $33.8 billion budget Friday that provides New Jersey some stability but leaves unresolved how the state will pay for the public pension, fund a school-aid formula and replenish a transportation trust fund facing insolvency.

Christie used his veto pen to strip more than $1.6 billion from the 2016 budget approved by the Democrat-controlled Legislature and hailed the spending plan as a balanced budget that outlays $2.3 billion less than in 2008, before he came into office.

His signature comes four days ahead of a Tuesday deadline for enacting the budget - the same day he is expected to announce a run for the Republican nomination for president, according to several people familiar with his political plans. They spoke to The Associated Press on condition of anonymity because they were not authorized to pre-empt Christie’s announcement.

Christie contrasted his budget action with other potential primary opponents, specifically singling out Wisconsin, where Gov. Scott Walker could be a White House contender.

“Today in New Jersey, four days early now that I’ve signed it, we have a budget. They don’t have one in Wisconsin, with a Republican Legislature and a Republican governor,” Christie said at a news conference.

His proposal slashed the Democrats’ pension payment to $1.3 billion from $3.1 billion. He also is allocating an additional $212 million toward the pension because of unexpectedly high revenue collection late in this fiscal year. And in one budget surprise, Christie is proposing an increase in the earned income tax credit, which helps low-income residents. The Assembly will return Monday to consider the suggestion, which could help 500,000 residents.

Nonetheless, the budget leaves some significant questions unanswered.

The biggest sticking point among lawmakers and labor has been the failure to fund the public pension according a plan laid out in a 2011 law. They argue the pensions are deferred compensation and by not paying more into the fund now, costs will rise in the future.

“Failing to make the required payments increases the unfunded liability, threatens the viability of the pension system, and is regarded negatively by the bond rating agencies,” said Senate President Steve Sweeney.

Christie acknowledges the system is on an unsustainable course but wants reforms to go further than they did in 2011 when pension beneficiaries increased their payments and lost a share of their cost-of-living adjustments. It’s not enough, Christie says, adding that for $195,000 in payments that the average teacher pays into the fund over a 30-year career, he or she gets back $2.6 million in benefits.

“That is a broken system no matter how much we put in,” he said.

Beyond pensions, the state’s roughly $1.6 billion transportation trust fund, which is meant to fund capital projects, is facing insolvency. The money coming into the fund from the state’s gasoline tax pays down debt, while capital projects are financed with additional debt. But that borrowing authority is set to run out by the end of next fiscal year.

Christie indicated he didn’t address the fund because it’s not technically part of the budget since it’s funded through a constitutionally dedicated gasoline tax.

But that doesn’t paint a full picture, says AAA Northeast’s Cathleen Lewis. She pointed to a loan that the fund made to New Jersey Transit. It’s a regular occurrence, but the fund required the money to be paid back sooner because of its own constrained finances. That contributed to NJ Transit’s $60 million budget gap, which led to a fare increase set to be approved next month.

“We’ve solved the problem for today but in reality what you’ve done is pushed the problem to tomorrow and there are not a lot of tomorrows left,” Lewis said.

As for school funding, it’s below what the School Funding Reform Act called for, this time by roughly $1 billion. The budget does include $12.8 billion in school aid.

Republicans argue that the money was never included in previous budgets because of financial constraints so it doesn’t make sense to say, as some Democrats do, that the 2016 budget slashed school funds.

Minority Leader Jon Bramnick says the formula puts constraints on the budget.

“What sense does that make that there should be an absolute guarantee of funding regardless of productivity, regardless of number of kids in the system, regardless of success?” he said.

Democrats, on the other hand, applaud the policy aim behind the formula but acknowledge there are many competing budget priorities.

“Is it a good policy? Is it a desirable policy? There’s no hesitation,” said Democratic Assemblyman Gary Schaer. “But there is a revenue problem in New Jersey. There is not a single budget problem facing New Jersey. There are a great deal of them.”

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