From the Halls of Trenton: State Budget, Lottery Revenues and New Jersey’s Pension Plan

by Hoboken Strategy Group

2017 is turning out to be a busy year in the Halls of Trenton, but hey, it’s New Jersey! Would you have expected anything less than that?

Aside from legislative business, 2017 is an election year in New Jersey with all 80 seats in the General Assembly, 40 seats in the Senate and the Governor’s Office all up for grabs.  Governor Chris Christie is nearing the end of his second term, so New Jersey will have a new Governor in January 2018.  Both the Democrats and Republicans currently each have contested primaries on who from each party will square off in the 2017 Gubernatorial General Election.  Get ready for an action-packed year!

Legislators were welcomed back to Trenton in January and kicked-off the year with statecapGovernor Christie’s State of the State on January 10.  The focus of the Governor’s speech highlighted success in several areas including lowering taxes, creating jobs and reclaiming lives.  The Governor hailed the administration’s accomplishments in reducing the State’s tax burden including a reduction in the State’s Sales Tax, an increase in the Earned Income Tax Credit, the phasing out of the elimination of the Estate Tax well as an increase in the State Income Tax exclusion on pension and retirement income.  Governor Christie further touted the State’s success economic growth and job creation during his administration.  Throughout the past seven years, the State has seen consecutive private-sector job growth with 278,000 jobs created since the Governor took office.  For the second straight year, a record number of new businesses filed with the Division of Revenues and Enterprise Services with 103,000 new businesses filed in 2016 and 97,800 new businesses filed in 2015.  The State has also seen home sales increase of 15 percent and unemployment falling to 5 percent, down 4.8 percent since January 2010 when the Governor took office.

Governor Christie also called for the advancement of the State’s fight against the opioid addiction epidemic.  Citing the State’s success in the fight including a  financial commitment of over $127 million to increase mental health and substance use treatment rates and expanding access to care as well as the creation of the Recovery Coach Program to aid overdose survivors, the Governor said there is more to be done.  The Governor called the Legislature to action and by February 15, the State enacted the nation’s strongest addiction recovery reform.  The Governor and Legislature enacted a law requiring insurance coverage for treatment of a substance abuse disorder and the elimination of any coverage waiting period.  The law also reduces the prior 30-day limit on initial opioid prescriptions down to a 5-day limit to avoid deadly and habit-forming gateway drugs from getting into the hands of children and the vulnerable.

The Governor returned to the Assembly Chamber at the end of February to deliver his Budget Address to a Joint Session of the Legislature.  The Governor’s proposed $35.5 billion State Budget plan includes no new tax increases or tax cuts, while holding the line on funding in areas such as property tax relief, municipal aid, public schools, and funding for higher education.

Citing the State’s reauthorization of the Transportation Trust Fund in 2016, the Governor called for a “jumpstart” in the State’s investment in addressing bridge deficiencies and the state of good repair for roads statewide.  The Governor proposed a $400 million supplemental appropriation to allow the Department of Transportation to deliver the largest construction program in state history.  This supplemental appropriation would need to be approved by the Legislature and signed by the Governor in order to become a reality.

Governor Christie also called upon the Legislature to overhaul the state’s school aid formula in the next 100 days.  While Senate President Steve Sweeney and Assembly Speaker Vincent Prieto have each been conducting hearings across the State on the issue, the Governor added an aggressive timeline to advance a proposal.  The Governor said, “I will make a pledge…to work with the leaders of the legislature to come up with a new funding formula. Everything is on the table. No idea is out of bounds for discussion. I am willing to work with you to solve this problem without any pre-conditions on the ideas brought to the table.”  While willing to compromise, the Governor also promised to “act alone” if forced to.

The Governor’s Budget intends to abide by a recent law that calls for the State’s pension contributions to be made in quarterly installments rather than one larger payment at the end of the fiscal year.  The proposed $2.5 billion pension contribution in FY18 would be a record for the State in one fiscal year.  However, the overall contribution would fall short of the roughly $5 billion contribution recommended by actuaries to restore the pension system.

Speaking of pensions, Governor Christie also proposed redirecting lottery revenues to “eligible pension plans.”  The full details of this plan have yet to be released, but the Governor suggested that the State Lottery could be better utilized to fund the pension system.  Currently, the nearly $1 billion in lottery proceeds are used towards programs that assist disabled veterans, college students and the developmentally disabled.  Any change in the current lottery system would require the enactment of legislation.

The Governor also called upon Horizon Blue Cross/Blue Shield, New Jersey’s largest health insurance provider, to create a charitable fund utilizing its $2.9 billion surplus that could be used to support drug treatment efforts for those without health coverage as well as other services for vulnerable residents who access Charity Care and Medicaid.  The Governor called upon Horizon to embrace the establishment of a permanent fund that would dedicate Horizon’s annual surplus towards tackling public health crises.  Governor Christie said, “As the sole insurer with this unique non-profit status and historically charitable mission, Horizon shares in the financial obligation of caring for our most vulnerable citizens…”  Horizon officials were quick to respond to the Governor’s proposal and the characterization of an “abundant surplus,” instead referring to the funds as a reserve fund of $2.4 billion.  In a statement, Horizon noted that the reserves only have “enough to cover 75 days of claims or just a single day of hospital care for every person Horizon ensures.”  Horizon also suggested that the Legislature enact a law that limits surprise out-of-network billing practices, which costs the company around $1 billion annually.

The Legislature will be out on Budget Recess in mid-March and begin deliberation on the State Budget including public hearings as well as opportunities for each State department and agency to present their budget proposals for the next fiscal year.  The Senate and Assembly Budget Committees will then develop a budget proposal which must be approved by the Legislature and signed into law by the Governor by the end of the Fiscal Year (June 30).  Stay tuned because budget season promises to heat things up under the Golden Dome and you can count on us to be there and fill you in on all of the action!

Hoboken Strategy Group is a boutique New Jersey government relations and business development firm made up of public affairs professionals with years of experience handling legislative and regulatory challenges on the local, state and federal levels.  Kay Elizabeth LiCausi, President of Hoboken Strategy Group, serves on the Government Affairs Committee for the Hudson County Chamber of Commerce.  Michael J. Comba serves as Vice President of Hoboken Strategy Group.  They can be reached online at www.hobokenstrategy.com and on Facebook at Hoboken Strategy Group.

 

 

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