budget – Page 12 – Hank Kalet

Corzine stimulated by Obama program

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Gov. Jon S. Corzine told Brian Lehrer on WNYC today that between taxes and federal spending New Jersey should see more than $17 billion in relief from the stimulus. About $7 billion will come in the form of tax relief to residents, with the rest coming in money for programs.

Corzine said that the state would have little impact on how the money is spent — the bulk come in the form of Medicaid and unemployment aid — but that lawmakers will have to sort some infrastructure dollars. The president has told governors that he expects money to be spent on shovel-ready projects that are chosen via an open process, Gov. Corzine said.

He says the stimulus money should save or create about 100,000 jobs.

He also said that there needs to be a process to track the money, to ensure that it is being used for its intended purpose.

The numbers, of course, are mind-boggling — but the spending is necessary and should be a huge help in a state hamstrung by budget problems, in terms of keeping people afloat and saving jobs.

Let’s be clear, however, federal money will not solve New Jersey’s fiscal predicament. That is something that all of us — politicians and taxpayers — created because of our unwillingness to make hard choices. There is not a New Jerseyan who has not screamed to save his or her pet program or to keep his or her property tax bill or income taxes from going up. Until we realize this, we will never climb out of the budget hole we’ve created.

A taxing state budget

As a property tax payer, I can’t say I am happy about this development — though, I can’t say I’m surprised.

Gov. Jon Corzine yesterday confirmed New Jersey’s popular property tax rebate program is among the items that may be cut or curtailed as he tries to balance the upcoming budget.

“Everything is on the table, and that’s where it will stay” until the budget address March 10, Corzine said.

Corzine said a “suspension of the property tax rebates would be a better way to talk about it,” but quickly added, “there’s a purpose to providing property tax rebates.

“Property taxes are a heavy burden. It’s not a gimmick program. It’s meaningful. We’re not anxious about making these decisions,” Corzine said, speaking to reporters at Kean University in Union Township, where he addressed high school students attending a leadership conference.

With diminishing options for cutting the budget, Corzine is preparing plans to severely curtail or eliminate the rebates for the coming year, The Star-Ledger reported yesterday.

The rebate checks to homeowners and tenants, which cost the state about $1.7 billion last year, represent one of the largest remaining nonessential spending items in the budget Corzine will present to the Legislature next month. He has estimated the spending plan at $29 billion, down from the $32.9 billion budget originally passed this year.

“We have to make tough decisions. The people expect us to be prepared to make the tough decisions,” he said.

The property tax rebate program has always existed on somewhat shaky ground, the product of a political compromise that was unsustainable as the state’s budget difficulties ran headlong into the national recession.

The program’s likely dissolution, hopefully, will be an impetus toward real reform, which the rebates never were. The only way to address property taxes, while dealing the state’s budget problems is to change the way we collect and spend money. That means moving toward a broader income tax that covers more services, municipal and school-district consolidation and a complete review of the kind of programs the state and local governments offer. (I’d also consider gutting county government, which is little more than a mechanism to collect massive amounts of campaign contributions and reward contributors with contracts.)

The hole gets bigger in the budget

New Jersey is facing a $3.5 billion deficit. That’s in the current fiscal year’s budget.

The recession, combined with years of questionable budgetary practices, has left the state with empty coffers and questions about how to continue providing services now and into the future.

To put the number into perspective, $3.5 billion represents about 12 percent of the current year budget — or one out of every eight dollars anticipated before the year began.

In response, state officials are planning two unpaid furlough days for state employees, one each in May and June, saving $35 million. State Treasurer David Rousseau said the furloughs can be done without the consent of public worker unions, which have already objected to a proposed salary freeze.

In all, Corzine announced there will be an additional $472 million in budget cuts, $550 million in additional funds from the federal stimulus bill and $335 million in extra funds from state surpluses and trust funds.

The state also plans a tax amnesty program, which will need legislative approval, that would bring the state an additional $100 million.

This year’s deficit now exceeds 10 percent of the original budget adopted last summer. It includes a $2.8 billion shortfall in revenue, a $600 million increase in spending — including a $270 million deposit into the depleted unemployment fund, to avoid an automatic tax hike on businesses — and $135 million extra to repay debt.

“That comes with difficult choices and real pain in a lot of places,” Corzine said.

And things are not likely to get better by the time the governor unveils his fiscal year 2010 budget,

Revenue in the current budget is forecast at $29.5 billion. Collections for the upcoming fiscal year, beginning in July, are now $28.5 billion, meaning another group of budget cuts can be expected in Corzine’s March 10 budget speech.

This is why, when revenue is pouring in during good times, you have to sock some away. To do what the state has done — under administrations of both political parties — is to court disaster when things turn bad.

The news is still bad

The governor, during his third state of the state address, continued what has been a long litany of dire pronouncements that in the end amount to nothing. Only this time, he attempted to borrow a page from President-elect Barack Obama and recast the bad news through a hopeful lens.

New Jerseyans’ “determination remains strong,” their “drive is undiminished” and “work ethic knows no bounds” — which will aid the state in digging itself out of its mess.

The problem is that New Jersey is not hurting because of the recession, though the national economy has not made matters any better.

The reality, as the governor has been saying since he first took office, is that the state has been making too many bad fiscal choices over the years, avoiding the difficult decisions and shifting money from one pocket to another and calling it income. That allowed it to avoid painful budgetary decisions — until the 2006 budget standoff led to a government shutdown. Since then, state government has been a bit more honest about what it faces, though it has remained unable to do what needs to be done to change the way we spend and raise money.

The national economy has made these problems worse, by eroding state revenues at a time when the state needs to spend added money on its social safety net and on infrastructure projects that would generate jobs. In the past, the state would borrow money to plug the gap, but the governor is proposing a belt-tightening that may address some of the long-term budget problems but lead to added pain now.

The governor admits this.

By the close of the calendar year, the deepening recession had required us to cut spending by another $800 million. That’s a total of $1.4 billion in cuts in this fiscal year alone.Let me repeat — $1.4 billion …… not in the rate of growth, but in absolute dollars.

It’s been painful, and we’ve had to make many ugly choices. But together with my partners in the Legislature, we are making the hard choices.

The question remains, however, whether they are making the right choices. The governor announced likely cuts in state aid to towns while making it clear that they will not be able to raise taxes to offset the cuts. That will just force the pain downward, making them slash their services.

In the end, Jon Shure, president of the liberal New Jersey Policy Perspective, hit it right in his comments to The New York Times, giving the speech “mixed marks” and saying “he would have liked to hear more concrete plans, rather than a campaign-style list of greatest hits.”

“The ratio between the accomplishments of the past and proposals for the future was far more in favor of the past, especially compared to his past speeches,” he said. “So it lacked a coherent vision of what we want the state to be.”

All pain, no gain

Gov. Jon Corzine has announced what is being described as unprecedented — but that is not necessarily a good thing.

The governor said Tuesday that he will need to cut $812 million from the current-year budget — on top of the $600 million cut included in the original spending plan when it was approved in June. The cuts — which would include antipoverty programs, agriculutural spending, aid to towns and schools and a wage freeze — are designed to close a $2.1 billion shortfall in the $32.9 billion budget. The shortfall is a result of the flagging economy, which has resulted in a massive dropoff in tax revenue. The governor also is expecting money from the federal government and a diversion of debt payments — he had planned to pay more against the debt than required in an effort to retire some of it early — to close the gap, according to the Ledger.

“These are deep cuts that touch every corner of state government,” the governor
said. “We scraped the bottom of the barrel,” added state Treasurer David Rousseau. “There were accounts that we found that had 99 cents left in them.”

There also could be tax increases included in the budget that will be proposed in March.

There is nothing good about this kind of news, which is likely to slow the state’s recovery from the recession, as Paul Krugman has pointed out. But the balanced-budget requirement and the state’s political culture — tax hikes tend to trigger ugly reactions — have tied the governor’s hands.

Of course, legislative Republicans are using the budget as a political club, purposely ignoring the difficult decisions he already has made — and forgetting (conveniently) that Republican Gov. Christie Whitman used fiscal sleight-of-hand to pass her tax cuts, only cutting spending that was popular among Democrats and leaving much of the state’s bloated government intact.

That said, the Republicans — and tentative Democrats — are only responding to political realities. We — meaning New Jersey’s taxpayers — have never been good at making sacrifices. Because of that, the budgetary pain we are feeling is only going to get worse.