A healthy surplus is key if New Jersey wants to improve its bond ratings, which would make it easier and probably cheaper to borrow money
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State Treasurer Andrew Sidamon-Eristoff is shown in this January file photo. State legislators have sparred over how much to increase New Jersey's surplus in the interest of improving the state's credit rating.TRENTON — When Gov. Chris Christie left for his two-week work vacation, he left behind a $640 million state surplus — the largest in a decade. When he returned Monday, more than half of that money was gone.
So what happened?
While Christie was out, angry Democrats seized on the $640 million figure to portray the governor as a Scrooge stocking up on rainy-day funds after cutting almost $1 billion from programs mostly benefiting New Jersey’s poorest residents.
Then state Treasurer Andrew Sidamon-Eristoff told reporters almost half of the surplus money was already set aside for incoming bills for senior property tax relief, debt service and health benefits.
New total: $365 million.
And this week, a suntanned Christie returned to Trenton and said he wanted to reverse his cuts to emergency aid for cities. But he’d have to take another whack at the surplus, he said.
The result: $225 million.
“It’s a little bit below what I would like,” said Christie, whose first budget had a $349 million cushion. “I’m not thrilled about the number.”
Democrats have accused Christie of distorting the numbers for political cover. Senate President Stephen Sweeney (D-Gloucester) Monday called it a “made up” figure and insisted the Christie administration is underestimating the size of the surplus to justify the spending cuts.
“You can use his own words, ‘Wall Street wants a large surplus.’ Well, now he’s going lower than he went before,” Sweeney told reporters. “He wouldn’t do that.”
But Democrats also forced the biggest drain. Their budget included $300 million in savings from the health benefits overhaul, which turned out to be just $85 million according to the Christie administration.
Here’s why the number matters: A healthy surplus is key if New Jersey wants to improve its bond ratings, which would make it easier and probably cheaper to borrow money. Two credit-rating agencies have downgraded the state this year, making New Jersey one of the lowest-ranked states in the nation.
At $225 million, the surplus represents less than 1 percent of what the state is spending this year. That proportion is not likely to please investors.
But Baye Larsen, a New Jersey analyst for Moody’s Investors Service, said it was too early to cast judgment.
“We look at end-of-the-year surplus,” she said, “and if that surplus being used to strengthen reserves.”
Larsen said investors favor states that manage their debt responsibly and avoid one-time remedies in their budgets. New Jersey has made progress on both of those fronts under Christie, she said. However, the state’s economic recovery is lagging the rest of the country, she added.
The $225 million figure leaves Christie little wiggle room for the rest of the fiscal year, which just began. New Jersey is fighting the federal government over $321 million in two pending lawsuits over Medicaid funding and Christie’s decision to cancel a huge tunnel project from New Jersey to Manhattan.
Related coverage:
• Moody's cuts N.J. bond rating by one notch, citing slow economic recovery, retirement costs
• Gov. Christie jabs Legislature for inaction as N.J. sees its credit rating downgraded