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Kasich’s Misleading Attack on Christie

Ohio Gov. John Kasich took a swipe at New Jersey Gov. Chris Christie’s governance, saying “we have a balanced budget” but “they don’t over in New Jersey.” That’s misleading. The state constitution requires New Jersey to have a balanced budget, and it does.

The Kasich campaign cited a news article that said New Jersey will face a projected $10.2 billion “structural deficit” next fiscal year if it fully funds its pensions and other statutory obligations and maintains all other programs at current levels. But Christie faced an even larger projected shortfall after he took office, yet he signed a balanced budget that year and the state finished with a surplus.

Kasich made his remarks Jan. 3 on “Meet the Press” when he was asked about his Republican rival for his party’s nomination. “You know, here in Ohio, we have a balanced budget. They don’t over in New Jersey,” Kasich said.

The New Jersey Constitution requires that the governor sign a balanced budget by July 1, and Christie met his constitutional requirement last year on June 26. So what is Kasich talking about?

It turns out Kasich was referring to a projection for next fiscal year.

Rob Nichols, a Kasich spokesman, cited a July 27, 2015, article that appeared on nj.com, a website of NJ Advance Media, that said the state Office of Legislative Services projects New Jersey will have a $10.2 billion “structural deficit” in fiscal 2017. What is a structural deficit? As the NJ Advance Media explains, “The OLS defines the structural deficit this way: ‘If the state were to fund all of its statutory obligations and continue all other state programs at the current or normal service level, while relying on revenues solely from existing sources, what is the sum of budget actions that would be required to produce a balanced budget?’ ”

The fact is, governors of both parties have struggled with the state’s “structural deficit” for decades, and yet they managed to produce balanced budgets year after year.

A report by the Volcker Alliance put it this way: “The Garden State’s budget practices under both Republican and Democratic administrations dating back at least to the 1990s have produced repeated structural imbalances. …”

Christie, who took office in January 2010, faced a $10.7 billion “structural deficit” in fiscal year 2011, his first budget as governor. He balanced the budget that year, as we wrote, by raising fees and cutting rebate programs for homeowners and renters, among other things.

NJ Spotlight, a news website in New Jersey, explains how Christie balanced his first budget:

NJ Spotlight, July 27, 2015: When Christie took office in early 2010, he inherited a $10.7 billion structural deficit heading into the 2011 fiscal year, a figure he now rounds up to $11 billion in stump speeches.

To address that structural gap, Christie didn’t cut $11 billion in spending in real dollars. Doing that would have equaled 37 percent of total spending since the state budget was about $29 billion at the time.

Instead, to “close” the structural deficit Christie, like many governors have before him, simply didn’t fully fund a host of programs. They included Homestead property tax-relief rebates and the state’s school-aid law.

Other budget items were altogether ignored, like the $3 billion state contribution into the public-employee pension system that was called for by actuaries that year. And he didn’t raise any taxes to bring in more revenue, something Democrats who control the Legislature called for.

His critics can say what they want about how Christie did it, but the New Jersey budget was balanced that year and every year since. In an analysis of the governor’s fiscal year 2016 budget, the Office of Legislative Services included a chart (Figure 11 on page 14) that shows the state has had a budget surplus every year dating to at least 1983, although it has been smaller in recent years under Christie:

Office of Legislative Services, March 2015: The Executive’s projected 1.0% surplus [for fiscal 2016] is very low by historical and national standards. As is shown in Figure 11, over the last 33 years the State’s actual surplus has exceeded 2% of expenditures 25 times. Two of the seven years with surpluses below 2% were during economic recessions (FY 1990 and FY 2002). New Jersey’s five most recent years report actual or estimated surpluses below 2% of expenditures, including the only years with surpluses under 1%.

In contrast, the national average of all states’ surpluses has exceeded 4% for more than a decade and topped 8% since FY 2012, based on survey data compiled by the National Association of State Budget Officers. The long-run average state surplus is 6.0%.

In the end, Kasich can criticize Christie for failing to address the state’s decades-old structural deficit, and he can criticize Christie for producing budget surpluses below the national average. But he can’t say New Jersey doesn’t have a balanced budget.