The headlines could undercut his comeback attempt and a potential 2016 bid. Christie's latest misery: N.J. finances

Here’s how drastically Chris Christie’s political fortunes have turned: Bridgegate might not be his biggest problem.

Just as the New Jersey governor is trying to turn the corner on the traffic scandal and restore his national luster, now he’s getting blamed for a yawning budget deficit and recent downgrade of the state’s debt.


Christie and state lawmakers have less than two months to close a sudden budget hole. Analysts say the governor’s administration brought on the problem by projecting the state would collect much more in tax revenue than it did; Christie’s aides insist the Legislature and changes in federal tax laws bear some of the blame.

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Either way, the stream of bad headlines could undercut a central tenet of Christie’s comeback attempt and message in a potential 2016 bid: that he’s led an economic “miracle” in the Garden State.

His allies have been adamant that he won’t be personally ensnared by the bridge scandal and that his record will carry him to national glory. But the financial woes may mean Christie will have even more explaining to do.

“Ultimately, governors live or die politically on the economic performance of their state,” said Mark McKinnon, a former strategist to George W. Bush. “If the economy gets much worse in New Jersey, Gov. Christie may want to close another bridge.”

Chris Chocola, head of the anti-tax Club for Growth, said if Christie runs his group will conduct an exhaustive review of the governor’s economic stewardship. Chocola raised questions about whether “the substance matches the rhetoric.”

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“I’ve never looked forward to a [review] more than Christie’s, assuming he’s running,” Chocola said in an interview. “And the reason [is] because you know there’s a lot of verbiage around him and I think he certainly gets a lot of attention by his style.”

Christie’s troubles reached an apex in the past few weeks, as Fitch Ratings, one of the “Big Three” credit rating agencies, downgraded New Jersey’s debt from AA- to A+ last week. It was the fifth such downgrade since he took office in 2010.

The company cited, in part, the magnitude of an additional $807-million-revenue shortfall that the Christie administration recently announced, which brought New Jersey’s total full-year budget gap up to just over $1 billion.

The Fitch downgrade means Christie now oversees just one of three states in the country with a debt rating in the “single A” category. The others are Democratic Govs. Jerry Brown (A) in California and Pat Quinn (A-) in Illinois, according to Standard & Poor’s state ratings. A lower credit rating means higher interest rates for borrowing, costing taxpayers money.

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To deal with the revenue shortfall, Christie told reporters he might have to slash or slow the delivery of pension payments to government workers. That would mean more financial pain for the state down the road and create uncertainty around one of Christie’s signature budget reforms.

Exacerbating the problem was that the disclosure came just a mere two months before the end of the fiscal year.

“What makes New Jersey stand out among the other states right now is that this is a large revenue shortfall to be confronted with very late in the fiscal year,” said Baye Larsen, a senior analyst with Moody’s, which put New Jersey on notice by changing its outlook for the state to “negative” in December. “Having a relatively large gap open up with only two months of operations left means that they have to make some very big decisions to address that.”

For Christie, there’s been a string of bad economic news.

The state’s unemployment was 7.2 percent in March, above a national jobless figure that fell to 6.3 percent last month. The state has gained back only 56 percent of the jobs lost during the 2008 financial crisis, according to Moody’s. The housing sector isn’t helping, either — the Mortgage Bankers Association recently ranked New Jersey as having the highest share of seriously delinquent mortgages or homes in foreclosure.

At the Republican National Convention and in his speeches as chairman of the Republican Governors Association, Christie has touted the “New Jersey miracle,” painting his economic stewardship as a model for success for the GOP all over the country.

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But New Jersey newspapers have been amping up the pressure on Christie over the situation.

“It’s not the scandals, it’s the economy. Got that?” read a screaming headline on the front page of the Star-Ledger of Newark Sunday.

Christie spokesman Kevin Roberts said the latest incidents paint a lopsided picture of an administration that had grappled with long-standing problems and the enduring effects of the worst recession since World War II.

The “rating agencies almost uniformly agree with what the governor has been saying since January — that the threat posed by the costs of pension, health benefits and debt service challenge our long-term fiscal health, and require further reforms to get these escalating costs under control,” Roberts said. He also blamed the state Legislature, which has been controlled by Democrats, for thwarting Christie’s attempts at budget reform, and heralded the administration early pension reform deal.

Still, the size of New Jersey’s budget gap is drawing notice, given the overall economic upswing in most corners of the country.

“It is unusual for a period of economic expansion. It’s been almost five years since the end of the great recession and most states are in a better fiscal position than they’ve been since the end of the recession,” said John Sugden, Standard & Poor’s senior director and lead New Jersey analyst.

New Jersey’s budget strain is largely viewed as the culmination of several major flaws in the state’s financial operations.

For one, the state has repeatedly resorted to one-time measures to fill its budget gap, such as securitizing tobacco settlement revenues. But Christie needs to come up with longer-term fixes, budget experts say, such as cutting municipal and school subsidies, paring agency costs or raising taxes. Keeping property tax increases under 2 percent has been a hallmark Christie initiative.

“The problem is that every year for quite a long time, New Jersey figured out how much they want to spend and then tried to plug the holes with a significant amount of [one-time] revenue,” said Tom Kozlik, a municipal credit analyst with Janney Capital Markets. “That’s not a good way to budget.”

Another mistake that analysts cite is the Christie administration’s repeated, overly optimistic revenue forecasts. The state overestimated by about $700 million how much it would collect in personal income taxes this year, which some said was surprising, given that officials were called out the past two years for doing the same thing.

As Christie looks for ways to fill the gaping hole in his state’s budget, New Jersey’s financial problems are further strained by the state’s fast-growing pension contributions. Moody’s estimates that New Jersey’s pension contributions will increase $800 million annually to $4.8 billion in fiscal 2018.

A failure to tackle the ballooning budget gap with long-term measures could have dire consequences for the Garden State, analysts warn. A state with budget woes is typically not adequately prepared to face the next economic recession — whenever that may come.

“Even without thinking and planning for the next recession, these are going to be very, very, very difficult issues to fix,” said Kozlik. “When there’s a period of economic expansion, states and other government organizations — they’re supposed to be stocking money away.”

Former New Jersey Gov. Tom Kean said the budget could turn out to be a positive for Christie if he can engineer a turnaround. Kean was once a mentor to Christie, but the two have had a falling out.

“If you’re a governor, your calling card is the state,” Kean said. “How creatively he deals with [the budget] could make it neutral or a bit of a plus.”