N.J. budget may hinge over fate of Horizon Blue Cross Blue Shield’s ‘excess profits’

The budget committees in both the Assembly and the Senate in New Jersey voted last night to approve a $34.7 billion spending plan that increases aid to local school districts and also funds several other majority-Democrat priorities, including cancer research, tuition-aid grants, and domestic-violence prevention programs.

Monday’s votes put the new state budget on track to win final passage in both houses of the Legislature on Thursday, a schedule that should give Gov. Chris Christie enough time to take action well before a deadline set in the constitution that requires a balanced spending plan to be in place each year on July 1.

The advancement of the budget bill was part of a flurry of legislative activity in the State House that also included budget-committee approval of legislation that would transfer the state Lottery into the beleaguered public-employee pension system, a measure that has been a top priority this year for Christie, a second-term Republican now in his final months in office.

Liberal activists also held a news conference outside the State House Monday to protest the final version of the budget even before it was passed by the legislative committees, faulting lawmakers for not fighting harder to increase get more funding for needy families, environmental programs, and New Jersey Transit.

Government shutdown?But what happens next to the majority-Democrats’ spending plan — and whether the state could still face a possible government shutdown at the end of the week — still remains to be seen.

Democrats in the Assembly remain opposed to a bill that would rewrite regulations impacting Horizon Blue Cross Blue Shield, New Jersey’s largest health insurer, and Christie has been insisting for weeks that the Horizon legislation must advance in tandem with the budget bill. Although the Senate complied with that goal yesterday by moving the Horizon legislation out of committee, the measure remains a nonstarter in the Assembly, setting up a potential high-stakes showdown with Christie later this week. He could decide to shred the Democrats’ budget using the line-item veto authority, or refuse to sign it at all and bring on a shutdown.

Christie, speaking Monday on his monthly radio show on NJ 101.5 FM, said he was “ready” to sign the budget for the 2018 fiscal year, but also said he wouldn’t “negotiate on the air” in the final days before the constitutional deadline when asked about the Horizon legislation.

The version of the state spending plan that cleared the budget committees Monday adds about $200 million in spending to a draft that was put forward by Christie at the end of February, and then revised by his administration in late May. For example, among other additions, the Democrats added $8 million for prisoner reentry programs; $6.5 million for tuition-aid grants; $5 million for the Educational Opportunity Fund; $2.2 million for domestic-violence and rape-prevention programs; and $2 million for cancer research.

School aidThe Democrats’ version of the budget also adds $100 million in funding for local school districts and reallocates another $31 million from some districts that right now are considered “overfunded” according to the state’s school-aid law to others that are considered “underfunded.” Another $25 million was added for pre-K education, reflecting a deal announced earlier this month by Democratic legislative leaders. But $25 million was also added for extraordinary aid for special education, a new element that apparently came after direct talks with the Christie administration.

The bipartisan talks also reduced the total amount of funding that the “overfunded” districts would lose, changing a cap of 1.5 percent of a district’s total budget that was included in the Democratic leaders’ plan to a cap of 2 percent of total state aid. The change should help ease the blow for school districts represented by GOP lawmakers.

Sight unseenThe new spending plan passed the Senate Budget and Appropriations Committee largely along party lines just before 9:30 p.m. Monday night, even though members had only just received copies of the bill — and after several Democrats had already left for the night, leaving votes in favor of the spending plan with aides despite never reading the final version. The budget bill also cleared the Assembly Budget Committee around the same time last night.

Senate Budget and Appropriations Committee Chair Paul Sarlo (D-Bergen) said the final version of the FY2018 spending bill represents “a lot of compromise.”

“I feel confident that the governor will sign the bill that passed both (committees),” Sarlo said.

He also praised passage of the bill triggering the transfer of the Lottery into the pension system, which on paper will help reduce the system’s huge unfunded liability, a hole that’s developed after years of only partial state pension contributions from the Christie administration and several of his predecessors. Though public-worker unions have been only lukewarm to the proposal, Sarlo called it a “significant piece of legislation.” Once completed, the transfer will improve the state pension system’s funded ratio from 45 percent to nearly 60 percent.

“I believe, in the long run, we’re going to look back at this legislation and say we did the right thing,” he said.

Contributing to pension planThe Lottery transfer bill also served to lower the total spending called for in the Democrats’ budget bill compared to the last revision offered by Christie in May by nearly $1 billion, largely because the on-paper transfer reduces the state’s annual pension payment under the latest actuarial projections. But the state will still not be making the full actuarial-required contribution even after the shift occurs.

During the news conference held by the liberal advocates on Monday, they said the new budget will also fail the state’s neediest residents because lawmakers didn’t push more aggressively for funding for top Democratic priorities. They also faulted the legislative leaders for taking school aid away from the “overfunded” districts.

“This administration just systematically cut everything to the bone,” said Analilia Mejia, director of the New Jersey Working Families Alliance. “Why capitulate to Gov. Christie at the 11th hour?”

And there’s also the issue of the looming showdown with Christie over Horizon. Assembly Speaker Vince Prieto (D-Hudson) is apparently still dug in against any proposal that would change how Horizon is regulated by the state and at the same time open the door for the state to raid some the company’s reserves. That’s something Christie has been calling for throughout the year as he’s called for more funding for anti-addiction programs.

Asked last night if he expects the budget legislation to be signed into law without the Horizon bill also passing both houses, Assembly Budget Committee Chair Gary Schaer (D-Passaic) pointed directly at Christie.

“I think that is a question more appropriately asked of the governor,” Schaer said. “The last conversation I had with (Prieto), which was admittedly a few hours ago, he reaffirmed his commitment not to post the bill.”

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NJ Spotlight, an independent online news service on issues critical to New Jersey, makes its in-depth reporting available to NewsWorks.