I am trapped in the office, so I didn’t hear the governor’s address. But I have read it and have some thoughts — some of which should be familiar to those who have read my columns over the past year.
The proposed budget offers some good — $300 million to cover an expansion of the state’s earned income tax credit, a nominal increase in aid to schools and towns, money for stem cell and autism research, a reduction in the state workforce through attrition and his call to end “Christmas tree items,” or those spending items tacked on to a finished product without discussion. The rest of the budget address, however, glosses over a single fact: that the governor and state Legislature failed horribly in their attempts to reform state government.
The governor speaks of “$9 million for the new comptroller’s office to root out waste, prevent fraud and reduce spending.” But the comptroller will have few real powers.
He speaks of the new property tax credits — which will offers savings this year, but are unsustainable beyond this year as they are currently constituted.
He speaks of a new $20 million consolidation fund “to provide meaningful incentives for schools and local governments to share services and reduce costs,” but doesn’t acknowledge that the consolidation panel is just advisory and unlikely to result in much real streamlining.
The biggest question mark, however, remains his commitment to “asset monetarization,” essentially using state assets to generate short-term cash. He makes an interesting case, arguing that it represents the only way the state can raise the kind of revenue necessary to provide the programs desired while also offering property tax relief.
The one option that is new and that we are now studying is asset monetization. It’s something that has been implemented in other states and, I can assure you, successfully around the globe. I think it’s fair to say that most governmental entities across the country, led by Democrats and Republicans, are examining its feasibility and appropriateness.
The economic potential from restructuring the state’s interest in our asset portfoliois too significant to ignore, whether that asset is the Turnpike, the lottery, naming rights, air rights, or whatever.
Potentially, asset monetization could reset the state’s finances by dramatically reducing our debt burden, and consequently reducing debt service.
Monetization could free up as much as a billion dollars or more in every year’s budget — long into the future.
Sounds good on the surface, but the potential pitfalls — loss of control over the “asset” (toll hikes and maintenance on the Turnpike and Parkway, for instance) — are hard to quantify. The issue remains how we account for the hidden costs and the nonmonetary costs. The governor address this issue this way:
Make no mistake – with any proposal, we would insist on protective conditions.
If we can’t ensure that the high standards of operations and maintenance will continue, we won’t proceed.
If we can’t ensure public safety will be maintained, we won’t proceed.
If we can’t ensure the state will maintain oversight in the governance of the asset, we won’t proceed.
If we can’t ensure that price increases will be predictable and reasonable, we won’t proceed.
I’m not feeling any more confident about the proposal, nor am I convinced that the choices the governor is taking off the table — income tax increases and streamlining of government — are as unpalatable as he thinks.
A broader-based progressive income tax coupled with a significant reduction in property taxes, forced municipal mergers and regionalization, elimination of county government taken together could go a long way toward fixing our problems.
In the end, “asset monetarization” may still need to be considered — I hope not — but at least we will have forced a reconsideration of New Jersey government before being forced down that path. To sell the Turnpike first will only put off the necessary reforms.
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Hank Kalet 