New Jersey Governor Chris Christie has an $807 million problem: a revenue shortfall created partly by his own overly optimistic projections that will likely cause pain no matter how the gap is closed.
On Tuesday afternoon, Christie is scheduled to provide a budget update that could include details of how to resolve the problem. The governor's proposals are likely to test his low-tax, bi-partisan fiscal management agenda.
"The menu here is all very unappetizing," said Rutgers University economist Joseph Seneca. "There are no good choices."
During his first term, Christie rocketed to the top of the national Republican scene while winning broad bi-partisan policy changes in his home state. He is considered a likely 2016 presidential candidate.
But his second term has looked more like a meltdown. Marred by the ongoing 'Bridgegate' scandal, Christie is now facing a large budget hole after April tax collections fell far short of projections.
Other states also got an unwelcome April surprise, but Christie's revenue estimates have been inflated for three consecutive years.
The $807 million shortfall has already helped drop New Jersey's credit rating to among the very lowest of all U.S. states, while exposing the fragile state of the economic rebound Christie hoped to make his legacy.
"There's certainly no New Jersey miracle he can point to," said Matthew Hale, an associate professor of public administration at Seton Hall University in New Jersey. "It may call into question his idea of a fiscal savior, someone who knows how to balance a budget and make tough choices."
New Jersey's lagging economic recovery is not necessarily all Christie's fault. He took the helm just after revenue and employment tumbled during the Great Recession. The state's pension system had already been limping before he got into office in January 2010. He's been criticized for using one-shot budget gimmicks to close holes, but his predecessors did the same.
Christie's options for closing the gap are few. Although his administration has said everything is on the table, he has already nixed the idea of hiking taxes.
Christie could also reduce the state's planned, statutorily required, record $2.25 billion payment to its under-funded pension system in fiscal 2015, or the $1.6 billion payment he is supposed to make this fiscal year, which ends on June 30. Or he could use more one-time revenue to balance the budget.
Any of those options could lead to additional downgrades, after all three main Wall Street credit rating agencies dropped the state to a single-A rating, among the lowest of all U.S. states except for Illinois and California and two notches lower than when Christie took office in 2010, according to Standard & Poor's Ratings Services.
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