Gov. Chris Christie today delivered his budget address for FY 2012 to a joint session of the (Democratically controlled) New Jersey state legislature. It’s an impressive budget, cutting both taxes and government spending while easing off last year’s emergency education cuts, making serious moves to reform Medicaid, and establishing the parameters for the kind of pension and benefits reforms that will be necessary to fully fund the state’s future obligations.
Last year when I wrote about Governor Christie’s remarkable budget victory over Democrats and unions in the deep-blue state of New Jersey, I warned that “by far the biggest test of the success of this year’s budget battle will be — next year’s budget battle.”
The fact is that no matter what happens between now and June of 2011, there will be a tremendous temptation to revert to the status quo ante: Either the state’s economy lingers in the doldrums and Democrats claim redemption for their long-failing policies, or Christie’s program helps spur a recovery for New Jersey taxpayers and Democrats come to voters with the message that fiscal crisis has been averted and New Jersey can get back in the business of big government.
But, I noted, Christie advisers were convinced that he had helped reset the bar — establishing what they then called “the New Normal,” a phrase Christie repeated again and again in his address today. Back in August, a senior Christie official told me:
“They say there is another $10 billion gap for next year,” says one top Christie insider of the 2012 budget.
“That’s based on the assumption that you take your hands off the wheel, and you go back. You don’t do any reforms, and you therefore put back all of the money that was pulled this year. No. The whole point of resetting the base is that as the economy starts to recover and we start to see some growth, then there is not an automatic conclusion that this program that was cut becomes restored. Then it becomes a serious discussion about what priorities of the state, what taxes should be cut.”
And so it has come to pass. “The baseline is zero,” Christie said of his budget, following through on his promise to end the days of spending by inertia, when relic programs would receive near-automatic funding increases year over year.
So what are the top lines? Most important for New Jerseyans, Christie’s budget would cut government spending for the second year in a row, this time by 2.6 percent, slashing individual departmental budgets by as much as 15 percent each. It would also bring $2.5 billion in tax cuts and incentives over five years, every dollar of it paid for. It would raise the death-tax exemption (New Jersey is one of only three states with both a death and an inheritance tax); it would cut a key corporate-tax rate 25 percent to spur growth; and it would double property-tax relief for seniors and the middle class.
Meanwhile it would hold municipal aid constant at last year’s (historically low) levels, and increase aid to local school districts by $250 million.
It would also fundamentally reform Medicaid in the state — to the tune of $250 million in savings in the current budget and $300 million more should the state be granted a waiver from the feds — in part by moving current recipients into modern managed-care plans.
Christie called on the legislature to pass his favored public pension and health-care reform measures, which would increase employee contributions, raise the retirement age, and eliminate automatic cost-of-living increases. To “sweeten the pot,” Christie offered to make an immediate $500 million contribution to the state’s pension fund — there hasn’t been a payment since 2009 — if the legislature passes reforms by next month.
Christie also came out against “Obamacare,” saying, “We cannot make meaningful reforms because of the restrictions on New Jersey from Obamacare. States desperately need relief from that unfunded federal mandate.”
#MORE#On education, Christie said he “agonized” over cuts he ordered to local school aid in last year’s budget, and restored some $250 million to local aid for FY 2012. But he also zeroed in on teacher accountability, calling again for merit pay and tenure reform. He also proposes doubling aid for school choice, increasing the number of charter schools while increasing aid by 50 percent, and making it easier to approve new charters in the future.
“We need reform, and we need to create choices for families who can’t afford to wait for their local schools to get better while their children’s lives are being wasted in failing classrooms, one year tragically on top of the next,” Christie said.
Christie might easily have coasted on last year’s victory and allowed net spending to creep up in 2012. Instead he doubled down, chastising the federal government for failing to take the lead on fiscal discipline and making the case that a year after he made his first set of difficult choices, both Democratic and Republican governors around the country were starting to follow “the New Jersey model.”
All across the country, Democratic and Republican governors are grappling with inherited budget deficits, skyrocketing pension and benefit costs, and state government cultures which embrace the status quo – no matter how destructive. They are just now coming to terms with the gravity of the situation we understood and responded to last year.
[. . .]
In New York, a Democratic governor has proposed dramatic reforms to Medicaid, because that program left on autopilot will lead both state and federal governments straight into a crash.
In California, a new Democratic governor has proposed to cut the number and pay of all state employees.
And in Wisconsin and Ohio, they have decided there can no longer be two classes of citizens: one that receives rich health and pension benefits, and all the rest who are left to pay for them.
[. . .]
Some thought the change might come from the federal government. But that hasn’t been the case. It is spending more than ever. The change is coming from the states, and the charge is being led by New Jersey.
Across the Hudson River, Governor Andrew Cuomo’s budget also cuts the actual dollars spent by the state – for the first time in 14 years. Why? The reason Governor Cuomo gave is simple. He said, “New York is at a crossroads, and we must seize this opportunity, make hard choices, and set our state on a new path toward prosperity.” The challenge, the change, and even the choice of words are similar to where New Jersey was one year ago.
In Michigan, Republican Governor Rick Snyder has framed the issue the same way. He said, “This is our opportunity to say let’s stop living in the past and start looking toward the future. Many of us are going to have to sacrifice in the short term, but by making these sacrifices, we can all win together in the long term.”
Michigan is taking the road to fiscal discipline paved by New Jersey.
And even in California, Governor Jerry Brown proposed to cut take- home pay for state employees by 8 to 10%, because, in his words, “we have no choice,” and for years, California has had “gimmicks.” Now, he said, California must “return… to fiscal responsibility and get our state on the road to economic recovery and job growth.”
Sound familiar? These ideas are not red or blue; they are the black and white of truth.
So is this a live budget? Very much so. Christie has, amazingly, stockpiled a good deal of political capital, and has cooperation from Democratic leaders on key items like pension and benefits reform. Rank-and-file Democrats will almost certainly kick and scream and hold hearings on a wide variety of cuts, but Christie holds a ridiculously powerful line-item veto that allows him to reduce spending down to the cent in any and every discretionary program. Just about the only thing Christie can’t do with his veto pen is increase spending. Which seems to suit him just fine.