The New Jersey that Chris Christie inherited was one that the Mercatus Center at George Mason University had ranked 46th in the Union on its economic-freedom index, and one whose business-tax climate the Tax Foundation had called the worst in the nation. Its narrow tax base had been in a death spiral for years: High-tech, high-paying jobs were fleeing — one Boston College study estimated $70 billion in wealth had left between 2004 and 2008 alone — and being replaced by low-wage, low-tech ones. For decades Trenton had jacked up taxes on the wealth that remained — inspiring new rounds of capital flight — and relied on weak budgetary rules and accounting tricks to kick growing shortfalls down the road. As a July 2009 study by Mercatus’s Eileen Norcross and Frederic Sautet concluded,
the government of New Jersey has resorted to fiscal evasion — avoiding the rules meant to constrain spending — and has sustained spending growth through fiscal illusion, obscuring the full costs of policies by relying on intergovernmental aid and debt to achieve the current level of spending. The state has long emphasized current spending at the expense of higher taxes for future taxpayers. The costs of this approach are now coming due.
Come due they had for Christie, who after less than a day on the job was being advised to borrow his way out of crisis. What he did instead set the tone for everything that followed.
Five weeks later, on February 11, Christie addressed a special joint session of the state legislature, replacing the vague promises of the campaign trail with first principles, and elaborating the constraints under which he was determined to govern:
Our constitution requires a balanced budget. Our commitment requires us to begin the next fiscal year with a prudent opening balance. Our conscience and common sense require us to fix the problem in a way that does not raise taxes on the most overtaxed citizens in America. Our love for our children requires that we do not shove today’s problems under the rug only to be discovered again tomorrow. Our sense of decency must require that we stop using tricks that will make next year’s budget problem even worse.
And in an extraordinary move, he then declared a fiscal state of emergency, announcing that by executive order he would impound $2.2 billion in appropriations from a fiscal year that was already seven months gone. That figure represented virtually every dollar the state was not legally obligated to pay out for the remainder of the year. In Bagger’s words, it was “everything that wasn’t nailed down.”
“By doing that so quickly and so dramatically, and by executive action, it really set the stage,” Bagger says. “It was just a very clear declaration that there’s a new reality.”
There was much wailing and teeth-gnashing about the cuts among Democrats. Sweeney accused Christie of “pick[ing] someone else’s pocket,” and senate majority leader Barbara Buono went so far as to say the executive order had “declare[d] martial law” in New Jersey.
This raised the stakes significantly for the FY 2011 budget battle, which was then only beginning. In the year to come, the state would face an $11 billion deficit that made the previous shortfall look like a gratuity. It was a big hole, and Christie needed Democratic votes to close it.