budget – Page 14 – Hank Kalet

New Jersey: The debtor state

How bad are the state’s finances? Consider this report from The Star-Ledger:

New Jersey’s state debt swelled by almost $2.2 billion last year even as Gov. Jon Corzine campaigned to rein in borrowing, state officials have confirmed.

The additional borrowing pushes the state’s debt load to $32.9 billion. Including $3.6 billion in bonds being repaid with payments from a national settlement against cigarette manufacturers — which the state Treasury does not count in its debt calculations — the state’s total debt load is $36.5 billion, nearly triple the level of a decade ago.

State bond documents show that the bulk of the new debt run up last year was attributable to the state’s $8.6 billion school construction program and transportation projects.

The problem with debt, of course, is not debt itself. Some debt is inevitable — it simply makes no sense to upgrade or build new roads using general operating funds (most people don’t do that with their homes), or to build new schools or purchase parkland. These are longterm expenditures that will be of benefit not only to us but to future generations.

The problem is that the state’s debt also includes an array of borrowing designed to do little more than balance the budget.

The upshot of all of this, of course, is that debt repayment pinches other areas of spending.

Repaying the state’s debt is scheduled to cost about $2.8 billion this year, a jump of about $115 million over last year’s debt costs. But Corzine said his debt retirement plan will cut that tab by at least $130 million.

That’s $115 million that had to go to debt repayment in a flat budget that could have gone to other programs — or to tax relief.

That makes debt our No. 1 fiscal issue, one that has to be tackled to allow the state to do the other things that need to be done.

Paying their way

It has always struck me as a bit unfair that my local taxes had to pay for police services when several dozen rural communities were able to take advantage of the State Police without chipping in to offset the cost.

Think about it. In South Brunswick, we pay somewhere in the neighborhood of $9 million to run our Police Department — about 18 percent of the total budget. If that service were passed along to the state and police spending was eliminated from the South Brunswick budget, the municipal tax rate would be slashed by as much as 20 cents — or about $380 for the owner of a house assessed at the township average of about $190,000.

The key to understanding this issue comes down to this: South Brunswick taxpayers and Monroe taxpayers and Jamesburg taxpayers and Cranbury taxpayers and the 474 other towns in the state that have their own police departments are paying for a service that rural taxpayers are getting for free.

Yes, I know that they pay state taxes, but so do I. And I know that most of us are subsidizing the big urban towns, but the big cities — thanks to a host of development policies pushed by the state and the feds — have eroding tax bases that make it nearly impossible to provide services without soaking their taxpayers.

At one time, the provision of police to small rural towns made sense. Farming towns were considered less well off, but over the years, small farming towns have seen the value of their land skyrocket. At the same time, they’ve been given a pass on paying for police services.

Paul Mulshine, in last Thursday’s Star-Ledger, comes to the small towns’ defense, calling the state’s decision to bill the towns a “war on small towns.” He quotes Republican Assemblywoman Marcia Karrow, who says that “the entire cost of rural State Police patrols, $12.5 million, could be funded with just 8 percent of the money sent by Corzine to six distressed cities. And those cities also get billions in property tax relief for their schools.”

“There is all kind of urban aid in the state,” said Karrow. “The State Police is the one small example of something we could call rural aid.”

Distressed is the key word, for me. The state has a responsibility to its citizens, especially those in distressed areas. The state’s cities certainly qualify and need help. Some smaller towns and working-class boroughs — like Manville and Jamesburg, for instance — deserve help, too.

But if towns that have the cash should pay their way.

That’s the argument that The Asbury Park Press makes today, in an editorial that criticizes a plan by state Sen. Jeff Van Drew, D-Cape May, to assess a “$40-per-summons surcharge on all motor vehicle violations to be used to underwrite State Police patrols in 89 towns that previously had received the service for free.”

The Press correctly calls the Drew plan “a wrong-headed response to the problem” of “small towns, mostly rural, being allowed to avail themselves of a service without having to pay the full cost.” Their suggestion:

(T)he towns should be given a reasonable period of time — two to three years — to either wean themselves off State Police coverage or pay 100 percent of its cost.

Options for the towns would include creating their own police force, contracting with an adjacent police department for coverage or working with other small towns to create a regional police department.

I would add that towns that can show a real financial hardship — and by that I do not mean just an increase in property taxes, but tax bills that are disproportionate to the income levels of residents — should have access to aid.

To allow the status quo to continue as it is just isn’t fair to the majority of the state’s taxpayers.

Budget reform? Not a chance

This is what passes for budget reform in this state — an executive order that can be rescinded by any future governor. Great.

Dispatches: State dances in place

This week’s Dispatches is about the state budget and the failure of reform in New Jersey. Read it and weep — or do something about it.

South Brunswick’s surplus of discontent

South Brunswick Republicans — or at least Republican candidate John O’Sullivan — appear ready to turn the South Brunswick Township Council’s use of its budget surplus into a campaign issue this year.

In a letter to the editor of our paper last week, Mr. O’Sullivan criticized the council for spending $9 million of the township’s $9.8 million surplus to balance its books this year and “hold the tax rate steady.”

Is this a good idea? What happens next year when costs for services, salaries and commodies rise and pension expenses increase? Where do we get the money then?

This year is an election year with three council members running for re-election. Next year there is no municipal election.

Is it a coincidence that the council is applying this short-term fix of sacrificing the current surplus in an election year, knowing that the following year will require either a significant tax increase or a dramatic cut in services?

Mr. O’Sullivan is It’s a simplistic understandingTownship Council Charlie Carley, who is up for re-election, issued this response this week, which will run on Thursday:

the surplus represents revenue (mostly property taxes) collected by municipal government in excess of what is needed to operate town hall (pay for police, public works, library, senior programs, etc.) for that particular year. Much of that Dec. 31 excess is typically rolled over in the following years operating budget. By the next Dec. 31 — lo, and behold — the surplus has typically regenerated itself as new ratables (which for the purpose of that particular budget year are unanticipated sources of revenue) come on line.

In South Brunswick, we have concentrated on the expenditures side of the budget. While it’s good that the town’s ratable base is growing, it’s more important that the mayor and council are keeping municipal spending in check. In fact, discretionary municipal spending has lagged the rate of inflation these past four years and the municipal workforce is significantly reduced in that same period.

He questions criticism, saying the current budget “is typical of the budgets of the recent past — a budget that maintains services, where discretionary spending remains flat, and the property tax rate is stable.” What is the point, he asks, of having “town hall stockpile the annually recurring surplus and so have to hike the property tax rate.”

The surplus is excess collection of property taxes its the peoples money. Why hoard the peoples money and pursue a policy of over-taxation for the sake of building a cash stockpile?

Even in good times its never good policy to raise taxes just for the sake of raising taxes no government should ever feel an entitlement to the peoples money. In tough economic times, raising taxes should be the last option exercised by government.

One hopes that the surplus debate plays itself out on a much higher — and more honest — level. Mr. O’Sullivan attempts to cast the Democrats in charge as being prfligate over-spenders who are doing little more than delaying a tax hike until after the council election. His defense of maintaining a surplus, however, lacks any substance or understanding of the roll surplus plays in municipal budgeting. While the council needs to keep an eye on next year’s potential costs, the reason that spending down the surplus is such a dangerous move — especially in a down economy — is that revenue is not likely to be generated at the level necessary to rebuild the account. If it generates less than $9 million, it will not be able to match this year’s contribution and it either will have to cut spending or increase some other revenue — most likely property taxes — to plug the gap.

Mr. Carley alludes to this, but disingenuously reports that the surplus “has typically regenerated itself as new ratables.” But this has happened just once in the last eight years and is unlikely to happen at a time of recession, especially with the township getting closer to build out.

As we’ve written before, it would be fiscally prudent for the council to raise taxes by a penny and work to cut about a half-million in spending from the budget. That would leave an addition $900,000 to $1 million in the surplus account to start the year and give the township a better chance to stabilize its use in the future.

In the end, the rule of thumb should be that no municipal governing body should be spending more of its surplus account than it thinks it can generate over the course of the year in new ratables and other anticipated but off-budget revenue (liquor licenses, for instance).