New Jersey Governor Chris Christie will say next week how he'll pay for the first phase of a 10 percent income-tax cut for the second-wealthiest U.S. state's residents even as he deals with as much as $1.3 billion in higher costs for pensions and debt.

Christie, a 49-year-old Republican who's set to deliver his third budget on Feb. 21 in Trenton, declined to offer specifics of the spending plan for the year starting July 1. He's expected to call for $150 million in income-tax cuts as a "down payment" on his pledge to cut the levy across all brackets.

While revenue for the six months through December rose 3 percent compared with the same period in 2010, it was still $326 million less than projected in the current $29.7 billion budget. Rising pension costs and a slow recovery from the longest recession since World War II led Standard & Poor's, Moody's Investors Service and Fitch Ratings to lower the state's credit grade last year.

"It is concerning if you can't tell us how you're going to pay for the cut in the revenue," Jamie Pagliocco, director of municipal-bond portfolio managers at Fidelity Investments, said yesterday at a Bloomberg Link conference in New York.