Tag: budget

This story — detailing the shortfall in revenues here in New Jersey — is why any federal stimulus plan must include money for state governments.

There’s nothing like a crisis to get New Jersey legislators moving. Too bad they rarely move until the crisis occurs.

Consider the legislation Steven Sweeney announced today that would prohibit the state from dipping into its unemployment insurance fund to balance its budget. It seems like a logical proposal — until you consider the history behind it, outlined in today’s Star-Ledger.

State lawmakers in recent years “diverted more than $4 billion from it to cover the cost of state aid to hospitals,” which depleted the fund just unemployment started to rise. That’s helped shrink the fund from about $3 billion four years ago to $161 million earlier this year, the Ledger said, “not even enough to meet one month’s worth of claims.” That, says Gov. Corzine, has forced state government to scramble to cover an expected shortfall.

“Now the piper is coming home to roost,” Corzine said. “We have to pay that piper. We have to do that either by putting money into that system from some other place, or we’re going to have to get help from the federal government.”

The unemployment fund, of course, is no different than any other fund at the state’s disposal. Over the last two decades, the state repeatedly has sought ways to offset increased spending my moving money between accounts, whether it has been selling roadways to itself, raiding the pension fund or borrowing against health benefits. In each case, as the governor puts it, the piper is now asking for payment.

The payment, in this case, could be “an automatic $400 million tax hike next June” on businesses that John Rogers, vice president of human resource issues for the New Jersey Business and Industry Association, told the Ledger “would certainly devastate New Jersey’s economy.”

The business group — which pays “about $2 billion a year into the fund” — had feared that the diversion would create problems down the road.

“We warned the diversions the Legislature has done to the fund would come home to roost at the worst possible time,” said Rogers. “We’re hemorrhaging money out of a fund that was almost insolvent.”

Hence, the Sweeney bill:

“If we start thinking about the future a little bit we won’t run into the crises that we are facing today,” said state Sen. Stephen Sweeney (D-Gloucester), sponsor of the measure (SCR-60). “We have to start thinking about the future.”

The Senate Labor Committee held a brief public hearing on Sweeney’s measure, which would allow voters next November to consider a Consititutional Amendment that would ban diversions from employee benefit funds like the Unemployment Insurance Trust Fund, the workers compensation Second Injury Fund and the state Temporary Disability Fund.

It’s a great idea. Too bad he didn’t put it on the table years ago.

Gov. Jon Corzine is in Washington, hat in hand, hoping the federal government will step up to the plate and help states deal with the effects of the federal economic meltdown. Appearing before the House Transportation and Infrastructure Committee, the governor echoed comments made by New York Gov. David Paterson saying “state governments will face devastating cutbacks if they do not receive assistance” from the federal government.

Appearing before separate congressional committees on Wednesday, Mr. Paterson and Mr. Corzine said their states, like many others, have already moved to address their budget deficits. Their actions alone would not be enough, they said.

Some will dismiss the governors’ predictions or say that the states brought these problems on themselves. And, make no mistake, New Jersey is in the terrible fiscal shape that it’s in because of the actions taken by state legislators and governors of both parties dating back to the early 1990s. (Corzine, however ineffectively, is the first governor to attempt to honestly address the mess.)

But the state’s inability to handle simple math has not been the only problem. Federal budget policies enacted over the last eight years under President George W. Bush have also cut into state revenues — less federal money has been making it into state coffers in recent years, money that has not been replaced.

The brewing recession paralyzing us now has only made matters worse and cries out for federal invtervention. That’s why the two governors are seeking “assistance to support infrastructure projects like bridges and roads, and for assistance to prevent social programs like unemployment insurance from running out of money.”
“The federal government ignores state and local governments at serious peril,” Mr. Corzine said.

The type of legislation they called for would probably be in the range of hundreds of billions of dollars. Congressional Democrats have said they would like to see such legislation approved quickly, but there is doubt that President Bush would agree.

Gov. Paterson, however, in written testimony said that the reluctance on the part of the president as foolish.

“I firmly believe that if it took only two weeks for the federal government to find $700 billion to bail out Wall Street and bank executives,” he said, “then we ought to be able to find a fraction of that amount to help preserve essential services at the state level.”

He added, “The results of federal inaction could be devastating in every corner of our nation.”

How bad are things for the state? Gov. Corzine announced today that “(m)ounting state budget troubles may force New Jersey to delay plans for a $350 million expansion of public pre-school programs.”

“We’re going to fight to hold our education funding,” Corzine told about 500 delegates at the New Jersey School Boards Association’s annual workshop in Atlantic City. “That doesn’t mean there won’t be any cuts. That doesn’t mean there won’t be any freezes. But it means it will be the last thing on the table.”

Corzine is grappling with a budget shortfall of at least $400 million in the current state budget and a forecast shortfall of up to $4 billion in the spending plan he will present to lawmakers next March. That has led, he acknowledged, to concern the state will defer providing $50 million for an expansion of preschool to communities with high concentrations of needy students next year.

“I know there’s some consternation the timing of this initiative will be delayed, but certainly not the commitment,” he said. Asked if he was suggesting the preschool initiative would be postponed Corzine said: “We’ll look at it. It’s not a big budget item next year.”

And then, consider this:

Economic troubles are forcing states to scale back safety-net health-coverage programs — even as they brace for more residents who will need help paying for care.

Many cuts affect Medicaid, which pays for health coverage for 50 million low-income adults and children nationwide, including nearly half of all nursing home care. The joint federal-state program is a target because it consumes an average 17% of state budgets — the second-biggest chunk of spending in most states, right behind education.

“Medicaid programs across the U.S. are going to be severely damaged,” says Kenneth Raske, president of the Greater New York Hospital Association. He expects some hospitals nationwide may drop services and some hospitals and nursing homes may lay off employees.

The fact is that funneling money to the states for infrastructure projects, healthcare and education creates jobs, saves existing jobs and helps improve quality of life. That’s where we should be focusing our money right now — not on a quagmire of a war or on bailing out rich bankers.