Thursday, March 18, 2010

The Hard Sell

This post originally appeared as a guest column for In The Lobby.

Governor Christie laid out his initial budget plan on Tuesday in his typical take-no-prisoners manner. The pain train is rolling down the tracks.

The soft sell has never been part of his repertoire. His message was clear and so was his intent. What is not clear is whether he will be able to sell it to the public.

Here’s why.

Yes, the public was anticipating big cuts to state services and local aid. In fact, a good number of residents were demanding it. But when you look at the bottom line, some may wonder whether they got what they expected ... and whether the pain has been fairly spread – particularly when it comes to education funding.

This is as much an accounting issue – and lack of public awareness about the budget process – as it is about any of the specific cuts.

To the extent that the public has been paying attention to the budget process over the past few years, they have been told that the last governor, Jon Corzine, reduced state spending from $34.6 billion to $29.0 billion by the time he left office this year.

Governor Christie says the state appropriations portion of his budget for the 2011 fiscal year will be $28.3 billion.

Huh? There are all these massive cuts, but state spending is going to be reduced by less than $1 billion!

But there’s more! Christie’s budget also includes another $1 billion in state spending that will be covered by anticipated federal stimulus funds. This brings his spending total to $29.3 billion.

Whoa? That’s more than Corzine spent, right? Not quite.

You see, Christie points out that Jon Corzine’s total budget spent $32.2 billion, if you include $2.3 billion in federal stimulus money that the former governor did not put on the books.

So, if we include the stimulus funds in both budgets, then Christie’s budget reduces state spending by $2.9 billion – or 9% – from the 2010 fiscal year. (This, of course, assumes there will be no supplemental appropriations made during the coming year – which would be a first!)

So, now that’s settled.
Hold on a second, you say. What about that gaping $10.7 billion dollar deficit we kept being told about? Doesn’t this budget fall short to the tune of $7.8 billion?

Well, yes and no. You see, the $10.7 billion figure was based on the assumption that the state would actually fulfill its legal obligations to fully fund the school funding formula, fully fund the property tax rebate program, and fully fund our existing pension obligations.

The truth of the matter is we haven’t done any of those things since the administration of George McClellan (I’m just guessing here). The so-called structural deficit is a bit of a canard. Just because the law says we have to fund these programs doesn’t mean that it happens.

As a side note, is anyone else scratching their heads over the continued underfunding of our current pension obligation in Christie’s “no gimmicks” budget? I know he’s pushing hard for pension reforms, but when does underfunding current annual obligations cease to be a “one shot” to balance the budget? Just curious.

That being said, it’s probably best for the governor if he drops the structural deficit issue from his rhetoric. The public is already sold on the problem and conflicting numbers only serve to confuse the situation. He’ll have enough trouble convincing the public that a $29 billion budget for FY11 actually represents a $3 billion decrease from FY10.

Most significantly, Governor Christie will be called on in the coming weeks to explain why cuts in school aid make up more than $800 million of the $3 billion reduction. This will be the line of attack used by his opponents, because it’s likely to present the best chance of undermining public support for his entire budget. The governor has to be ready for it.

And then, we’ll have to go through this entire process again next year, when – barring some economic miracle that starts filling the state coffers – Christie has to figure out how to make up for the $1 billion in federal stimulus money that will disappear.

Now that’s going to take a real hard sell.

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