Budget Priorities Focus of Court Battle

The battle over how the state should pay for its schools has become a battle over who should pay to balance the state's budget.

The Christie administration, in its last two budgets, has made a conscious decision to slash education funding, meaning that it consciously opted not to fund the state's three-year-old school funding formula -- a formula upheld by the court just two years ago.

Gov. Chris Christie said shorting the funding formula was necessary to balance the state's budget and return the state to fiscal health. And his administration is now arguing--correctly--that forcing the state to fully fund the school-aid formula will blow a hole in the state budget and could have an impact on numerous other programs.

There is a way out of this that will not create hardship for the state's middle-class residents, something several justices alluded to this week during oral arguments in the case.

It starts with a reinstatement of the so-called millionaires' tax, which had provided $1 billion in revenue while it was in place and would go a long way to plugging the $1.6 billion education-funding shortfall.

That's the point Associate Justice Barry Albin brought up during his questioning (from NJ Spotlight):

(H)e asked about the so-called millionaire’s tax at the center of political dispute for two years, not calling it that but making it clear in describing the surcharge that Christie let expire, costing the state $1 billion in revenues.

The state said it had no money to provide districts, he said, but this was not the first time it had been in a fiscal hole.

"I know you are still in a fiscal crisis," Albin said, "but when the promise was made [to fully fund the formula in 2009], there was a $1 billion funding source and now we’re $1 billion less."

The response from Peter Verniero, the former associate justice representing the Christie administration before the court on this case, was silence, as Robert Braun points out:

Verniero would not answer Albin. He simply would not talk about the millionaire’s tax — in or out of court. He just ran away from the issue.

"I know you are still in a fiscal crisis," Albin said, "but when the promise was made [to fully fund the formula in 2009], there was a $1 billion funding source and now we’re $1 billion less."

Verniero wouldn't comment, but Gov. Chris Christie has made it clear that he believes the surcharge on income is bad for the state. The governor believes it drives high-earners from the state and suppresses job growth, but his critics -- rightly, I think -- ask how the governor can ask nearly everyone else in the state to sacrifice, especially those at the lowest end of the income spectrum, while handing a gift to the handful of people affected bu the surcharge.

Consider this blog post from New Jersey Policy Perspective, the liberal think tank that has reviewed the budget, which sets the governor's slashing of the state earned income tax credit (a 25 percent cut) alongside a $41 million tax break handed to Campbell Soup.

This cutback in tax credits for working families comes even as the Christie administration and the Legislature are expanding tax credits for corporations in New Jersey.

For example, last month the state awarded Campbell Soup a $41 million tax credit to renovate its corporate headquarters, move 49 jobs from Cherry Hill to Camden and hire 50 new employees at the Camden site over the next 10 years. The credit includes $6.3 million for new furniture. Campbell qualifies for the subsidy, officially called the Urban Transit Hub Tax Credit, which is aimed at redeveloping urban centers, because its offices are within a mile of the Walter Rand Transportation Center.

The total cost to the state to fund that tax credit to Campbell Soup is nearly as much as the $45 million in savings gained by reducing the state EITC.

Raymond J. Castro, who wrote the post, asks a question that the court should ask -- and may be asking, if Albin's questioning of Verniero can be applied to the entire court:

So who needs this help the most, one of the largest corporation in America or working New Jerseyans who can barely make ends meet to support their children?

The governor, who talks a lot about making the state more affordable for the middle class, has made it obvious what he believes the answer is. The court appears to be leaning in a different directions.

The question is where New Jersey's voters stand.