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NJ Democrats, Christie poised for budget fight

By Edith Honan

NEW YORK (Reuters) - New Jersey's Democrat-led state legislature passed a spending plan on Wednesday, the eve of the state's budget deadline, but the deal was immediately rejected by Republican Governor Chris Christie.

"The Democratic budget passed today by the Senate and the Assembly is unconstitutional in its present form based on hundreds of millions of dollars in spending that is unsupported by constitutionally certified revenue," Christie said in a statement issued by his office.

"At this time, the governor can't be certain if the remedy is the line item veto or whether he needs to consider sending it back to the legislature," the statement said.

The Democrats' spending plan, which was passed by both houses on Wednesday, increased spending on schools and for a handful of smaller programs.

The Democrats also approved a tax on the state's highest earners. Christie vetoed a so-called "Millionaires' Tax" last year and is expected to do the same again.

"We had a new governor who consistently talked about share sacrifices while defending tax cuts for the very wealthiest among us and pushing more and more pain for everyone else," Assembly Budget Chairman Louis Greenwald said in his prepared remarks.

"The Governor's idea of 'shared sacrifice' is that the wealthiest should share even greater riches while the rest of us make all the sacrifices," Greenwald said.

Paul Sarlo, the chairman of the Senate budget and appropriations committee and a Democrat, said the Democrats' plan "resets the priorities of New Jersey."

Christie, known for his blunt style, has been a rising star in the Republican Party since taking office last year with a lean-government, anti-tax agenda.

But this year New Jersey has suffered downgrades to its credit rating, tarnishing Christie's budget-fighting reputation. Christie blamed the downgrades on his Democratic predecessors' policies.

The year's most contentious legislation, a plan to force public employees to pay more toward their pensions and health benefits, passed both houses of the Democrat-led legislature last week and Christie signed it into law on Tuesday.

On Wednesday, Moody's Investors Service called the pension and health benefit changes a "credit positive" for the state, but said it did not expect the state to see material savings until fiscal year 2018.

Christie has said the pension changes will save the state $120 billion over the next 30 years, while changes to the state health benefits system will save an additional $3.1 billion over the next decade.

The Democrats' increase in education spending comes in part in response to a May ruling by New Jersey's highest court ordering the state to provide about $500 million more for its poorer school districts next year.

The court ruled that last year's school aid cuts of more than $1 billion -- ordered by Christie and enacted under protest by the legislature -- short-changed the state's most disadvantaged students.

(Reporting by Edith Honan. Editing by Peter Bohan)

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