Christie's proposed budget, which he unveiled in a Statehouse address, also includes a proposal to convert Hagadorn Psychiatric Hospital in Hunterdon County's Glen Gardner into a site for homeless veterans' services. The 288-bed facility is slated to close in June.
"Because we have made the tough choices in these last two years, we can make the right ones now," the Republican governor told a joint legislative session in which he promised to veto any efforts by Democrats to raise taxes.
Christie's budget represents a 3.7 percent increase in spending to go with an improved economic forecast.
Although tax collections are lower than projected for the first six months of the year, Treasurer Andrew Eristoff said he expects a more robust second half. He has forecast revenue growth to top 7 percent in fiscal year 2013.
Christie's proposal includes $212 million more for education. Most school districts would see modest increases in state aid. Aid to higher education, which took hits during Christie's first two budgets, will increase by $107 million, or 6 percent, over current levels.
The budget also contains $183 million to fund the first half-year of the governor's proposed 10 percent income tax cut - the reduction would take effect Jan. 1, midway through the fiscal year - and money to fund a 5 percent increase in the earned income tax credit for poor working families. The increase would boost the average benefit to around $500 per family.
Democrats want Christie to cut property taxes instead. They say residents are in dire need of property tax relief, though Christie says the 2 percent property tax cap adopted last year has already slowed the rate of property tax growth.
The proposed budget recommends funding property-tax rebate programs for homeowners and senior citizens at current levels. Christie also proposed flat funding for hospitals, which were cut last year.
Municipal aid would remain unchanged, though less transitional aid money would be available to financially strapped cities and towns.
Christie's budget also would make a $1.1 billion payment to the severely underfunded pension system, up more than a half-billion dollars from the current year's contribution. The state agreed to phase in its annual contribution to the pension system after Christie signed legislation requiring government workers to pay more toward their retirement.
The Legislature must adopt a balanced budget by July 1, the start of the new fiscal year.