February 23, 2014 / 12:00 PM / 4 years ago

New Jersey's Christie presents budget under political, fiscal cloud

NEW YORK, Feb 23 (Reuters) - New Jersey Governor Chris Christie will introduce his fifth budget on Tuesday under political and economic clouds that could hamper support for any new policy proposals.

The fiscal challenges were many even before Christie’s political troubles began. The state must make a $2.3 billion payment to its underfunded pension system in fiscal 2015, and revenues could fall short of projections by at least $400 million because of New Jersey’s slow economic recovery.

Political pressures are likely to loom large, too, with Christie and his administration facing allegations they use bullying tactics and retribution to get their way.

Christie has vehemently denied advanced knowledge of lane closures that led to four days of gridlock on a bridge to New York in September.

The traffic jam was allegedly an act of political retaliation against a Democratic New Jersey mayor, carried out by Christie loyalists, and has dented Christie’s standing in national polls of likely Republican presidential contenders for 2016.

Just how the controversy affects his budget message remains to be seen.

“There’s only so much political oxygen. And Bridgegate takes up so much of it that it might be difficult for him to breathe anything other than that,” said Matthew Hale, an associate professor of public administration at Seton Hall University in New Jersey.

Despite the political distractions, or possibly because of them, Christie could look to make a bold budget proposal to burnish anew his reputation as a tough, populist fighter.

“It’s a question of whether he wants to set up a fight to change the conversation or just keep the noise level down and ride out the,” Hale said.

Christie doesn’t have much economic room to maneuver, however. Bi-partisan pension reform in 2011 set pension payments to increase steadily until they hit about $4.8 billion in 2018.

The state is also on track to bring in at least $400 million less in revenues than previously projected, though this fiscal year doesn’t end until June 30.

It also has the fourth-highest debt load among states by more than one measure, according to Moody’s Investors Service.

In 2013, the state’s bonded debt obligations increased 4.1 percent to $40.4 billion, the steepest annual increase since Christie took office and more than double the debt growth of the previous year.

Moody’s dropped its outlook on New Jersey’s Aa3 rating to negative in December, citing the state’s lower than expected cash balances, growing pension burden and persistent structural gap.

“We are now going into the third consecutive year where the state revenue collections are underperforming expectations,” said Moody’s analyst Baye Larsen. “This is largely due to economic performance and lagging economic recovery. But there is a certain element of optimistic revenue assumptions included in that.”

In January, Christie said during his State of the State speech that he wanted to lengthen both the school day and the school year for New Jersey students, and he hinted that more pension reforms could be on the table. Both proposals could lead to fights with public sector unions and lawmakers.

He also gave a nod to an issue that topped his agenda during his first term, but that he hasn’t yet achieved: broad tax cuts. He said he’d announce specific ideas during his budget address.

Christie “may be under some significant pressure to show he’s truly a tax-cutting, real Republican,” Hale said.

“Assuming he’s still around in 2016, that’s something he would run on in New Hampshire and South Carolina and Iowa,” he said, referring to the initial proving grounds for presidential candidates.

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