With the nation riveted by public-sector showdowns in Wisconsin and Ohio, the guy who started it all last yearNew Jersey governor Chris Christiejustifiably took some credit on Tuesday, as he unveiled his new state budget. But the budget doesnt build enough on the foundations Christie has laid or on his own political capital. His current approach carries a serious risk: that he will miss his moment to pursue major change.
Though governors Scott Walker of Wisconsin and John Kasich of Ohio want changes far more radical than anything Christie has proposed, theres no question that Christie made their plans possible. He was the first blue-state leader to challenge sacred cows like teacher benefits, and he lived to tell the tale. Through popular YouTube videos and old-fashioned stumping, he changed the national debate. As he noted in his budget speech, governors from Jerry Brown in California to Rick Snyder in Michigan to Andrew Cuomo in New York, plus Walker and Kasich, now echo his themes. Look at how other states are following New Jersey, Christie said. In Wisconsin and Ohio, they have decided there can no longer be two classes of citizensone that receives rich health and pension benefits and all the rest who are left to pay. Christie added that the nations governors are just now coming to terms with the gravity of the situation that we understood and responded to last year. . . . Theyre standing up and saying, just as I did last March, the day of reckoning has arrived. In the absence of national fiscal leadership, the change is coming from the states, and the change is being led by New Jersey.
Hes right. The question now is: What will he do in the new world that hes helped create? Christie admits that New Jersey has taken only its first steps toward solvency. Hes forthright in conceding that the state still relies on one-shot arrangements, such as delaying payments to creditors, to balance its budget. Since taking office last year, hes cut such reliance dramaticallyby 85 percent from the trough of the economic crisisso that such gimmicks represent just 2 percent of state revenue. Thats a major step forward. But some of the follow-up moves that Christie proposes seem more like running in place.
First, hes increasing state education aid to cities and townsevery districtby $250 million. That sum represents one-third of the amount he cut last year. But New Jersey has a long way to go before it can say that its spending wisely. As Christie said, Newark spends $24,000 per pupil annually, and Asbury Park $33,000, to make barely half of their kids proficient in math. Before hiking spending again, it would be prudent to wait and see if Christies other reformsincluding 23 new charter schoolsmake a difference.
Christie also isnt bold enough on pension reform for public-sector workers. Christie is urging the legislature to eliminate automatic inflation protection for current and future retirees and to require all current workers to contribute more to their own retirementsfrom a minimum of 3 percent of their pay to a maximum of 8.5 percent. And he wants the retirement age for younger workers pushed from 62 to 65. Thats good as far as it goes, but Christie should ask for more, like putting new workers into 401(k)-style plans. We need a national debate on retirement in the public and private sectors, and that would be a good way to start one.
Christie has another pension-related problem. To pay future retirees benefits that theyve already earned, New Jersey must contribute to a pension fund today. That fund is far smaller than it needs to be to make the promised payments$37 billion smaller. The states contributions to the fund, this year and next, should be about $7 billion. But Christie has pledged to make only $506 million in pension-fund contributionsand even that, he says, is only if lawmakers agree to his reforms. This confuses the situation, implying erroneously that the reforms will enable the state to start funding its $37 billion shortfall. Again, Jersey owes that money to retirees for past work; no matter what reforms Christie enacts, the states taxpayers cant avoid paying the bulk of it. Instead of hiking education spending again, Christie should funnel extra dollars into the pension fundthe better to ensure that reforms help pare down future liabilities, allowing for future tax cuts and public investments.
Theres also the issue of public-sector health benefits. Here, Christie has hung tough. Under his proposal, state workers would pay 30 percent of their benefit costs, up from 8 percent. Thats a terrific reform if he can get the votes for it. The problem, though, is that Christie would use those savings to double a rebate that the state sends homeowners to make up for their high local property-tax burden. This is simple pandering. Sure, voters want lower property taxes. But to achieve that, local governments have got to rein in local spending. Christie can help here. Indeed, hes made a great start, with his 2010 cap on local property-tax increases (though it allows municipalities to raise taxes for items such as pension and debt costs) and with efforts to reduce state mandates on local governments. This is the right approach to the property-tax problemnot subsidizing high local spending with bigger checks from Trenton, which is the old blue-state way of doing things.
Finally, Christies budget is missing something important. As he rightly notes, budgeting is about making choices. Weve identified key priorities and put together a budget that funds those priorities, he said in his speech. One omission, then, was disturbing: infrastructure. New Jerseys roads are a mess, and the state needs better rail if it wants to grow. Christie has been cleaning up the states transportation-authority cesspools, vetoing some spending at the New Jersey Turnpike Authority, for example. Budget documents show that he wants to do more. But much of his budgets $200 million increase for capital construction goes to past obligations that the states transportation trust fund owes. Christie should have said that he wants voters to hold him accountable for transportation improvements, just as he wants them to hold him accountable on education resultsand that one of his goals for next year is to revisit the idea of building a new tunnel under the Hudson River. Notwithstanding Christies cancellation of such a tunnel-construction project last fall, the project has to be done someday.
The governor may have good reason to proceed carefully. Maybe he figures, for example, that doubling those local tax rebates, while nauseating to contemplate, is necessary to show good willand to get voters to pick Republican lawmakers who will pursue tougher fiscal measures. The problem is that nobody, Christie included, has done enough yet to earn the citizenrys trust in such matters. And the governors half-measures risk sending the message to voters that its safe to spend again, when it most assuredly is not.
Nicole Gelinas is a contributing editor to the Manhattan Institutes City Journal.