Christie Says Medicaid to Be Biggest Budget Challenge

The state’s Medicaid program, which provides health care for the poor, faces a $1.4 billion deficit because of the loss of assistance from the federal government and the requirement to maintain services at levels mandated by the U.S., Christie said.

“The biggest problem in the budget is Medicaid,” said Christie. “We’re in a situation this year where we lose $900 million in federal funding for Medicaid but are being told that we can’t reduce benefits. In times of flat or declining revenue you run out of options quickly.”

Christie, 48, a first-term Republican, spoke in a 45-minute interview at Bloomberg headquarters in New York. He is scheduled to propose a spending plan on Feb. 22 for the fiscal year beginning July 1. Federal funds to help states pay higher Medicaid costs, resulting in part from the economic slump, are set to run out June 30.

The next budget may be less than this year’s $29.4 billion, Christie said.

“Is it possible? Yes,” he said when asked whether the budget may fall from the current year. “I don’t know yet.”

Rising Figure

The governor, who ousted Democrat Jon Corzine in 2009 amid voter backlash over taxes and a weaker economy, has become a rising figure in his party by taking on public unions and lowering spending. New Jersey’s homeowners paid the nation’s highest median property-tax bills in 2008 at $6,320, according to the Washington-based Tax Foundation.

At the center of his struggles with unions representing teachers and state workers has been a plan to close a $53.9 billion state pension deficit in part by rolling back a 9 percent increase enacted in 2001 and suspending retirees’ cost- of-living increases.

The first Republican to win statewide office since 1997 also said his appearance at an anti-abortion rally yesterday was a personal decision, not an overture to a presidential run.

Christie, who uses YouTube videos to spread his message, said he isn’t ready to be president and ambition alone shouldn’t drive potential candidates. In October, the Virginia Tea Party Patriots named him their top choice for the Republican nomination in 2012.

“I’m not dumb, I see that there’s an opportunity here to run for president if I wanted to,” Christie said. “You need to first decide: ‘Am I ready to walk into that office on that first day and feel as if I’m ready for this.’ I’m not there.”

Election Year

Lawmakers should approve plans to lower state pension- and health-care costs by April, in part because this year all 120 legislators are up for election in November, Christie said.

The package would standardize the retirement age at 65, from as low as 60 now, and would force workers to contribute 8.5 percent of salaries for pensions instead of 5.5 percent. Christie said he has limited time to win passage through the Democratically controlled Legislature as lawmakers may turn to focus on campaigning after the June 30 budget deadline.

“We’re sliding toward a situation where we’re going to be in an even greater financial crisis” without cutting pension payouts, Christie said.

The state may face a lower deficit than the $10.5 billion gap projected by a legislative forecaster, Christie said.

‘Spent Too Much’

The imbalance is a “moving target,” he said. The state got to that level because “we’ve spent too much, we’ve borrowed too much.”

In the current budget, Christie cut $10 billion of spending to help close a record $10.7 billion deficit. Those cuts included $1.3 billion less aid to municipalities and schools and skipping a $3 billion pension payment.

New Jersey, the second-wealthiest U.S. state by per-capita income, can manage its fiscal situation without Congress crafting legislation to allow governors to seek bankruptcy protection, Christie said. Congress shouldn’t “paper over” states’ fiscal holes, he said.

“On the issue of state bankruptcies, I don’t think we necessarily need that tool at the moment,” Christie said. “You have to be a responsible officeholder and come in and fix the problems. It may be that at some point we conclude that we can’t do it, but I’m nowhere near that moment.”

--With assistance from Henry Goldman in New York. Editors: Stacie Servetah, Mark Tannenbaum, Ted Bunker

To contact the reporter on this story: Terrence Dopp in Trenton at tdopp@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net