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June 22, 2015

Budget deadlines loom in PA and New Jersey

Opposing parties far apart on some major issues in both states

In New Jersey and Pennsylvania, the governor’s office and the majority in the Legislature are held by opposing parties -- a political environment that has set the stage for tense budget negotiations before fast-approaching deadlines.

The deadline for a new budget is the same for both states -- by the end of June, although the issues could not be more different.

Pennsylvania Gov. Tom Wolf wants sweeping changes to the tax code and has called for larger investments in education -- proposals that are running into Republican opposition. In New Jersey, the budget fight centers around the state pension fund with Democrats wanting to raise revenues to make a state contribution -- a proposal opposed by Gov. Chris Christie.

“Underfunding the pension payment has put the state deeper in debt, lowered the state's credit rating and hurt the economy,” Assembly Speaker Vincent Prieto, D-Hudson, said in a statement. “The state should balance its budget and fully fund its pension obligation.”

Christie cut a $1.6 billion state contribution to the public pension system last year because of a revenue shortfall. The state's pension system has about $83 billion of unfunded liabilities and was funded at only about 44 percent in fiscal 2014. He wants to pay less than half of the $3.1 billion the state worker unions wanted the state to contribute this year, according to nj.com.

Democrats are looking to plug the funding gap by raising taxes on people who earn more than $1 million a year and raising the corporate tax rate, according to a budget proposal released Monday. The proposal to raise taxes on millionaires is not new -- a similar proposal in last year’s budget was vetoed by Christie. And the governor has already said he is against raising taxes during this budget cycle.

"I do not and will not increase taxes on the people of New Jersey to pay for this," he said in May.

New Jersey’s state Supreme Court handed a victory to Christie earlier this month by ruling that the state could cut its contribution to the pension fund in violation of an agreement Christie signed in 2011.

Last year, Christie vetoed tax increases that Democrats put in the state’s budget. This year the budget process may follow a similar pattern with the governor striking down provisions he does not like. Governors in New Jersey and Pennsylvania can veto budget line items.

In Pennsylvania, Wolf is in the middle of his first budget cycle. His nearly $30 billion proposal seeks to make structural changes in state spending and overcome a more than $1 billion deficit.

In March he proposed lowering property taxes and raising revenue through increases in the state sales and income taxes. He also proposed a surcharge on natural gas drilling that would help fund education.

“We need a new approach -- and we need to question the decisions that got us to where we are today,” Wolf said in his budget speech.

“Over the past four years, Pennsylvania took a step in the wrong direction by trying to balance our state budget on the backs of our schools,” Wolf said. “That is why the very first thing my budget does is restore the $1 billion in cuts to public education that occurred under the previous administration.”

According to a breakdown of where the budget stands published by the Inquirer, there have been regular talks between Republican leadership and Wolf’s administration but the sides are not close to an agreement.

Republicans, the newspaper said, don’t believe raising taxes is necessary and may propose their own version of the budget and abandon Wolf's template.

“We do have different directions on many issues,” House Speaker Mike Turzai, R-Pittsburg, told the Republican Herald.

Reporting from Reuters was used in this report.