Tag: budget

Expediency’s downward spiral

Perhaps things are darker than we realized here in the great state of New Jersey. I mean, thanks to a decision by then-Gov. Christie Whitman, the state is about $58 billion short in its fund to provide health care to retired workers.

In 1994, New Jersey decided to stop setting aside money in a fund to pay for health care for its retired public workers. The savings paved the way for a big tax cut.

Meanwhile, hundreds of thousands of public workers were being told that as long as they worked 25 years, the system would provide virtually free health care for them when they retired, often when they were as young as 55.

No one added up the cost — until now.

It turns out that New Jersey will need about $58 billion, in today’s dollars, to provide all the care it has promised its current and future retirees. That’s nearly twice the state budget and nearly twice the amount of its outstanding debt. And because of the step it took in 1994, the state has virtually no money in reserve to cover those costs.

And….

The portion of the $58 billion that they need to come up with each year will rise sharply because of soaring health costs and a burgeoning population of retirees, according to the New Jersey Treasury. The state will spend about $1.1 billion on this year’s care, and the figure is expected to double in five years.

Meanwhile, the state’s revenues are largely static. That means that unless something changes, New Jersey will have less money each year to pay for vital services like colleges, hospitals and mass transit. Its popular program to preserve green space just fell victim to the need to devote huge amounts to the retirement plans and debt servicing.

You remember 1994, right? The first year of the Whitman administration.

So what happens now?

To create a retiree health fund from scratch, Mr. Goldman estimated, New Jersey would need to start by setting aside $6 billion a year to make up for all the years of no contributions.

That is on top of the pension fund’s pressing needs for new contributions.

Which means….

making more retirees pay for part of their health premiums and by switching retirees into a network of doctors at negotiated fees. Currently, most state retirees can see any doctor. As of 2003, fewer than half the states allowed retirees to do so.

Not exactly the direction health care reform is supposed to take. But then,

the plan to make more state retirees pay part of their premiums had a setback in June. The government agreed to drop it for retirees who signed up for wellness programs, which are supposed to save money by reducing the incidence of preventable diseases.

Meanwhile, retired teachers have dodged the bullet entirely. Their union, the New Jersey Education Association, negotiates contracts with school districts and not with the state, and the state has not asked them to chip in for their premiums.

But have no fear. There is another plan on the table — asset monetization (otherwise known as the sale or lease of the N.J. Turnpike) — though its exact shape and the timetable on which it will be unveiled has yet to be, well, unveiled:

The governor’s advisers had hoped to use the turnpike proceeds to pay down debt or fund the state’s retirement plans. But in June, Mr. Corzine acknowledged that the effort had become a political lightning rod, with his opponents whipping up fear around predictions that that the turnpike would fall into foreign hands.

He said foreign ownership was not in the cards, nor is a sale to a profit-making company. For now, he says he wants more planning and public debate, putting off any way to use the turnpike as a financial resource until after the state legislative elections in November.

“I’m going to fight for it,” the governor said. “The status quo is unacceptable.”

I’m pretty certain that monetization will be unacceptable, as well, leaving us back at square one and the likelihood that major budget cuts and tax hikes are in the offing.

Welcome to New Jersey, the state where political expediency has made a royal mess of things.

South Brunswick Post, The Cranbury Press
The Blog of South Brunswick

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Wait ’til next year

New Jersey Policy Perspective is calling the state’s latest budget a “Band-Aid” budget. And he’s right. In an op-ed on Sunday by Jon Shure in The Record and again in an e-mail “alert,” Shure and NJPP pretty much lay out the issues that the governor and Legislature delayed dealing with, in particular the structural deficit, the pension deficit and the dubious fiscal legacies of Govs. Whitman and McGreevey.

Overall, the budget was designed with November’s election in mind:

The kind of budget this would be was established back in February when the governor set a relatively low bar by saying he wasn’t about to ask legislators to make a heavy lift in a year when every seat in the Assembly and state Senate is up for election.

Next year will be different.

By the next budget season, lawmakers should have acted on Corzine’s soon-to-be-announced “asset monetization” plan for filling the deficit hole (or whatever is proposed if that doesn’t fly) and vetted a new school-funding formula, among other things.

We can expect a far more contentious and controversial round of budgeting. And that’s not necessarily a bad thing. Debating priorities and finding honest ways to pay for them can be messy. But in the long run, that’s better than denial.

Next year, New Jersey’s budgeteers should be judged by how much courage and vision they show — not how fast they can finish.

This year, well, let’s just hope the Band-Aid is enough to staunch teh bleeding.

South Brunswick Post, The Cranbury Press
The Blog of South Brunswick
The Cranbury Press Blog

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Maybe a fix for the library

The state Legislature maybe revising its cap law, though the chances remain slim. The cap law, which the governor pushed hard as a way to control spending, always seemed a foolish contrivance that was likely to do little more than force towns to make bad budgetary choices.

So, enter Jamesburg. The borough, facing difficult fiscal realities made more difficult by the cap, was preparing to close its library, the council claiming that it had no choice.

The plan was defeatist, but given the fiscal mess that is New Jersey, you could see how Jamesburg and dozens of other small or urban towns might view something like this as a quick fix.

In any case, relief may — or may not (the bill had not bee voted upon as of 6 p.m.) — be on the way.

This story — reported and written by Bill Greenwood — will be running in The Cranbury Press tomorrow:

Legislation that would exempt public library spending from a 4 percent tax levy cap could alter the Borough Council’s plans for a fall referendum on the Jamesburg library.

The bill, which has the support of the New Jersey League of Municipalities and the New Jersey Library Association, had not been scheduled for a vote as of Thursday afternoon. It was unclear whether it or a substitute measure might be voted upon before the Legislature goes into recess this week, according to members of the Assembly.

The legislation, sponsored by state Assembly Majority Leader Bonnie Watson Coleman (D-Mercer), would remove state-mandated spending for municipal public libraries from a new cap on tax levies that will take effect next month for towns with fiscal year budgets and in January for towns like Jamesburg that operate on calendar-year budgets.

The new cap, signed into law by Gov. Jon Corzine earlier this year, will limit increases in tax levies, or the total amount raised from taxes, to 4 percent. It included few exemptions and moved library spending under the cap for the first time in 25 years.

The Borough Council says the cap law and a longstanding state law that requires municipalities to provide a minimum amount of funding for municipal libraries are squeezing the borough’s budget.

It says it needs more flexibility in crafting its budget and is proposing two questions for the November ballot. One would ask borough residents to approve a change in the library’s status from a municipal library to an association library, which would allow the council to reduce funding. A second, non-binding question would ask if the library should be closed. The council would need to approve ordinances by mid-August to place the questions on the ballot.

Borough Council member Brian Grimes said Thursday that council members support the cap exemption. He said approval of the legislation would make the referendums unnecessary.

“We need to have this done,” he said. “Not just for our library, but for every other community in the state thats in the same position.”

Pat Tumulty, executive director of the New Jersey Library Association, said her organization sought to have the bill introduced and voted on Thursday by the state Assembly and Senate as an emergency measure because the Legislature will not hold another session until November. She said there are many urban areas that operate on fiscal-year budgets — such as East Orange, Newark and Bayonne — that could be affected.

Ms. Tumulty said there are 245 municipalities in New Jersey with municipal public libraries, and she expected them all to be affected once the new cap law takes effect.

“All the municipalities will be impacted,” she said. “As soon as they start putting their budgets together for next year, they’ll realize the implications.”

Assemblyman Bill Baroni, a Republican whose district includes Jamesburg and Monroe, said he would support the legislation if it is introduced.

“We need to do everything we can through legislation and regulation to save Jamesburgs library,” said Mr. Baroni, who is running for a state Senate seat being vacated by Republican Peter Inverso.

He introduced an alternative bill Thursday that would exempt library spending from the levy cap for one year. He said he was unsure whether the Coleman emergency bill would be introduced and wanted to have a backup plan. He said the alternative measure is truly an emergency bill that would at least give us more time to fix it permanently.

Assemblywoman Linda Greenstein, a Democrat from the same district as Mr. Baroni, supports the cap exemption for libraries, but said it was unlikely that the Coleman bill would be introduced. She said a letter would be written to Gov. Corzine asking him to exempt library spending from the cap. The governor has publicly opposed adding exemptions to the tax levy cap in the past.

Sen. Inverso could not be reached for comment.

The exemptions would seem logical, except that they create the impetus for more exemptions to be built into the cap, ultimately rendering it useless. That may not be a bad idea, but it doesn’t address the real need for reform any better than the cap.

I would move libraries off budget entirely, creating a separate dedicated tax similar to the open space tax that South Brunswick, Cranbury, Monroe and Middlesex County. It would be the local equivalent of Mercer County, which has a county system and a dedicate tax.

The tax would be flat and towns could be given the opportunity to make municipal contributions, as well. And libraries could still rely on Friends chapters and foundations for extra cash.

South Brunswick Post, The Cranbury Press
The Blog of South Brunswick
The Cranbury Press Blog

E-mail me by clicking here

Email me at grassroots at comcast dot net.