Star-Ledger Editorial: Gov. Christie, New Jersey can’t afford a tax cut
February 23, 2012
The line in Gov. Chris Christie’s budget speech Tuesday that sticks with us most was this one: “Why not cut income taxes when your fiscal house is in order?”
This is political spin of the highest order. For the record, Fitch Ratings downgraded New Jersey’s general obligation bonds in August to AA-, among the lowest in the nation.
One key problem is that the state is still shorting its pension funds by more than $2 billion a year. The reason is that when Christie and Democrats agreed on last summer’s landmark reform, they let themselves off the hook by phasing in full pensions payments over seven years. Thus, next year’s deposit of just over $1 billion is really only two-sevenths of the sum actuaries recommend.
So when the governor says we can afford a tax cut, it’s sort of like saying you can afford to go a nice restaurant because you are making only partial payments on your mortgage. That’s the kind of thinking that got us into this jam in the first place.
Yes, Christie is doing better than most governors. Several of them skipped the pension payments entirely. Gov. Jon Corzine made two payments of roughly $1 billion each, then stopped making deposits, too, as the recession hit.
But when Christie said in his budget address that “the state will make good on its obligation to fund our pension system,” he was stretching it.
Yes, he is making good on last year’s political agreement. But it’s only a fraction of the real deal. It is scheduled to rise by another $500 million or so each year over the following five years.
Making those payments will be tough. And it will be even tougher if the Legislature agrees to this income tax cut, which will cost $1.15 billion when it’s fully phased in.
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