State Assembly leaders told Gov. Jon Corzine yesterday that there is no support for a sales tax hike in the lower chamber, essentially killing one of the more controversial aspects of the governor’s proposed budget less than two weeks before it has to be approved.
That takes about $1.1 billion in anticipated new revenue out of the governor’s proposal, leaving a massive hole in the $30.9 billion budget that will not be easy to plug.
Contrary to Republican claims, the budget pretty much holds spending even. Nearly all of the new spending comes from a handful of categories out of the governor’s control: a $1.1 billion increase in payments to the state pension fund (which will not even meet current obligations); $300 million goes to the state’s woefully underfunded unemployment fund; $358 million for new Medicaid spending and $483 million will cover an increase in state debt payments. That’s $2.24 billion right out of the gate. Add that to some unpopular cuts — higher education, for instance — and you can see that this is not a wild and outlandish spending plan.
The factor underlying all of this is an estimated $4.5 billion to $5 billion hole — i.e., the state has been spending that much more than it has been taking in and has been plugging the hole with fiscal gimmicks. In the short term, that has allowed the state to avoid too much pain. But as each year passes and each budget is put in place, there are fewer and fewer gimmicks available. And some of them — like delaying payments into the state pension fund — come with a price that will come due in the not-too-distant future.
So, where will the Assemby take this? If the sales tax hike is off the table, will it opt for an income tax hike? This would be fairer, but probably even less politically acceptible, making it unlikely.
Will it hike assorted fees? Perhaps, but there are not enough of those to make too much of a difference.
Will it cut spending? Not likely — or not to the degree that would be necessary to plug the hole (nor should it — that would inflict far too much pain on the state’s residents).
So then what? It will do what politicians in New Jersey always do — cheat the future by deferring pension and other payments, hoping that someone down the road will fix the mess. Already, as The Star-Ledger reports, Assembly Democrats are talking about cutting $300 million from the governor’s pension proposal, which will only increase the size of next year’s structural deficit. That leaves them only $800 million to go.
The South Brunswick Post, The Cranbury Press
Hank Kalet 