A New Jersey Assembly committee yesterday approved a fiscal 1992 budget that Florio administration officials said might threaten the state's triple-A credit rating because it overestimates revenues.
With nine Democrats assenting and six Republicans casting no votes, the Assembly Appropriations Committee released the $14.7 billion spending plan to the full House for consideration.
The Senate has yet to introduce a proposed budget, which by law must be approved by next Monday, the start of the new fiscal year. But Senate officials and administration sources say sentiment in the upper chamber is running against the Assembly plan and in favor of Gov. Florio's alternative budget proposal.
"I would expect substantial changes" to the Assembly spending package, one Senate source said.
The Assembly Democrats' budget is about $378 million larger than Gov. Jim Florio's spending plan. The governor immediately expressed concern about the state's rating, saying the Assembly plan did not use "the most conservative revenue estimates" and might result in inadequate operating reserves.
"I am committed to doing everything in my power to keep New Jersey's triple-A credit rating," Gov. Florio said in a statement.
Earlier this month, Standard & Poor's Corp. placed New Jersey's AAA general obligation bond rating on CreditWatch with negative implications, warning that opportunities for inflating revenue estimates could compromise the fiscal integrity of the budget.
Nancy Feldman, a vice president at Standard & Poor's, said a decision on whether to retain the state's rating will likely be made early next month, when New Jersey is expected to seek a rating for a $1.4 billion short-term note sale and the fiscal 1992 budget is passed.
Moody's Investors Service has said it is also waiting for the final budget before reassessing its triple-A rating.
One reason state lawmakers are said to favor the Assembly plan is that it carries fewer political liabilities by purporting to eliminate the need for large-scale layoffs and up to $370 million in union concessions proposed by the governor.
But legislative and administration sources say the final budget will not be able to avert layoffs on the scale the governor has proposed unless there are substantial union concessions. Discussions over such concessions have broken down in recent days, and union leaders have threatened a strike if their contract with the state is breached through layoffs or forced furloughs.
Assembly Appropriations Committee Chairman John S. Watson said one goal of the Assembly bill is to provide a way to fully fund the state's contracts with its employees.
"I'm glad to announce a plan that would allow us to do that and avoid the devastation that thousands of layoffs would cause," Assemblyman Watson said. "If we're going to downsize state government -- and I have no problem with that concept -- we ought to do it by attrition, not by chaos."
Another key difference between the two competing budget plans is revenue estimates. The Assembly took its projection from the Office of Legislative Services, which expects the state will earn about $90 million more in taxes and other revenue sources than the Florio administration forecasts.
The governor said he would rather use his own more conservative revenue estimates to maintain a safety cushion. He also expressed concern that the state will not be able to implement additional spending cuts the Assembly committee proposed yesterday.
The Assembly plan, like Gov. Florio's budget, assumes the state will collect $400 million from a proposal to sell a stretch of highway to the state Turnpike Authority. It also assumes about $620 million in extra revenues from changes in the way the state collects utility taxes.
Another $214 million is expected to come from aditional federal Medicaid reimbursements, which New Jersey has yet to secure from the federal government. Gov. Florio did not include the new Medicaid revenues in his original budget, but has since added them, according to Harvey Fisher, an aide to state Treasurer Douglas C. Berman.
The Assembly plan would also cut the projected year-end surplus to $211 million from Gov. Florio's proposed $264 million. Assemblyman Watson said rating agency officials have told him the lower figure is an "acceptable" surplus.