monetization – Page 3

Fiscal gamesmanship

I’ll open this post by saying that I am skeptical — and this is generous — of the plan announced today by the governor to “monetize” the state’s toll roads.

Speaking at the state League of Municipalities convention in Atlantic City today, he offered the plan as a way to cut the state’s debt load in half.

In a speech before the 92nd annual New Jersey League of Municipalities convention, Corzine said he would reduce the state’s bonded debt by at least 50 percent, largely through toll increases. He would not say how much tolls would be going up, nor offer a range.

Corzine promised to unveil details of the plan in January, including any proposed toll hikes. He stressed he would not sell the New Jersey Turnpike or the Garden State Parkway, but try to form a nonprofit agency to manage the toll roads and raise money through bonding to pay down the debt.

“Every dollar that goes to debt service or unfunded liabilities is a dollar that can’t go to municipal aid or school funding,” Corzine said to several hundred local, county and state officials who attended the luncheon. “It’s all connected.”

There is something to be said for doing something drastic to reduce the state’s $32 billion debt, which as Juan Melli at Blue Jersey points out “could save about $1.5 billion in yearly interest payments which would help close our over $3 billion structural deficit.”

There is truth in this. The question is whether the method being floated is anything more than another in a long line of gimmicks.

I remain skeptical.

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

E-mail me by clicking here.

Monetization: Not so popular with voters

This is really not very surprising.

When it comes to increasing state revenue, Governor Corzine appears to have put nearly all his eggs in the asset monetization basket. Media reports say that he is preparing to mount a high-profile public information campaign to win over the state. Results from the latest Monmouth University/Gannett New Jersey Poll indicate that he has a lot of work ahead of him.

In general, most New Jerseyans think the idea of “state asset monetization” – or more specifically, leasing toll roads or the lottery, allowing developers to build on train stations, and selling naming rights to state owned property like parks – is a bad one. Fully 55% say this concept is a bad idea compared to 33% who say it is a good one. The remainder have mixed feelings or no opinion. About 6-in-10 Republicans (58%) and independents (61%) give asset monetization a thumbs down, and even the governor’s fellow Democrats are more negative (46%) than positive (37%) on the idea.

The governor has not released specific plans on how he proposes to leverage state assets for revenue, but much of the public discussion focuses on operation of the state’s toll roads. The poll found that 59% of state residents specifically oppose leasing operation of the New Jersey Turnpike or Garden State Parkway even if the money were used for a specific purpose. Just 30% support the idea.

However, the public are just as opposed to other revenue-raising efforts that involve state assets. They oppose allowing developers to build over train stations 58% to 33%. They also oppose leasing operation of the state lottery 53% to 34%. And they even oppose selling the naming rights to state parks 54% to 37%. Majorities of Democrats, Republicans, and independents alike oppose all these monetization ideas.

Also not surprising is this:

when faced with a forced choice between leasing state assets and raising taxes, New Jerseyans would give away the state assets by a 62% to 21% margin. Opinion is more divided if the choice is between leasing state assets (43%) and making significant cuts in education and other government services (44%).

Monmouth Polling Director Patrick Murray says this raises some questions.

“As a general concept, asset monetization, to use the governor’s parlance, just doesn’t sit well with New Jerseyans. While most residents would choose leasing state assets over raising taxes, it is really not clear that the public believes that the state has only these two options available.”

The question will probably come down to the specific choices placed on the table — meaning the specific cuts, the specific taxes and the impact all of this will have on the longterm fiscal health of the state and the state’s ability to reform its overall tax and government structures.

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

E-mail me by clicking here.

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

E-mail me by clicking here.

Silly season takes to the road

We are in the midst of a silly stretch as regards the governor’s so-called “monetization plan.” The plan, which would sell, lease or in some other way turn assets like the N.J. Turnpike or the state lottery into instant cash for use to pay down debt (primarily) has little support around the state, including in the state Legislature.

But a questionable inclusion in the state budget granting the governor money to study the plan (and the likelihood that the governor will not be presenting a plan until after the November elections) is drawing fire.

We received a press release the other day from Republican candidates for the state Assembly, Adam Bushman of Jamesburg and Tom Goodwin of Hamilton. (They have been very aggressive in sending out releases, more aggressive than their opponents.) Here is the text of the release:

State Assembly Candidates Tom Goodwin and Adam Bushman today criticized Assemblywoman Linda Greenstein for voting down an amendment that would have stricken a line item from the state budget during Thursday’s budget debate, authorizing the sale of state assets including the New Jersey Turnpike.

Goodwin described the move as being detached from New Jersey voters.

“This vote exposes how out-of-touch Assemblywoman Greenstein is with the families of the 14th District,” asserted Goodwin. “As I knock on doors, I continue to hear the same message: voters oppose selling the New Jersey Turnpike because it will lead to more toll increases. Ms. Greenstein should have followed the lead of Assemblyman Baroni in voting to strike from the state budget the provisions to sell public assets.”

During Thursday’s budget debate, Assemblywoman Greenstein voted against removing a budget provision allowing unlimited funding for “legal and engineering fees, financial advisers and other consultants and services associated with, as well as any other costs determined necessary in preparation for, the monetization, sale or lease of public assets.” (Section 75, FY2008)

Bushman called the vote “fiscally irresponsible.”

“Assemblywoman Greenstein’s vote to allow the sale of the Turnpike is bad for New Jersey,” said Bushman. “This is an election year ploy that gives the administration a blank check to sell off state assets while hiding the details of the deal from the voters until after Election Day. It is fiscally irresponsible to sell off our state assets and disconnected from the families of the 14th District.”

The budget line, as I said, did not authorize the sale, but only the study. But that matters little at election time. On the flip side, we have the Democrats’ release, issued today:

Assemblywoman Linda Greenstein and Assembly candidate Wayne DeAngelo today declared their unalterable opposition to any plan that would authorize New Jersey toll roads to be sold or leased to any private or foreign entity.

“Any plan that proposes giving control of New Jersey’s toll roads to a private profit-seeking firm is an absolute non-starter,” said Greenstein (D-Plainsboro). “Over the past 50 years, New Jersey built these roadways for the public’s use and with public’s money; they must remain in public hands.”

Greenstein and DeAngelo said they would vote against any plan that potentially could place the New Jersey Turnpike, Garden State Parkway, or Atlantic City Expressway under private or foreign ownership – either before or after Election Day.

DeAngelo said continuing public control over the highways is the only way to protect against unchecked toll hikes.

“Handing over our state’s vital infrastructure to any company whose primary concern is their stockholders is an open invitation to higher costs for commuters,” said DeAngelo (D-Hamilton). “Our highways should be operated with the interests of New Jersey’s motorists, not global corporate interests, as the paramount concern.”

OK. So the Democrats are opposed, as well. Then why not vote down the amendment? Simply, it was an election-year ploy on the part of Republicans, as most of this debate has been.

No one, aside from the governor, seems to think this is a good idea. But it certainly makes for good political theater.

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

E-mail me by clicking here

Not dead yet

The dreaded monetization plan is on hold, but not dead. (See this, as well.)

Gov. Jon Corzine’s grand plan to solve the state’s lingering financial crisis by selling the Turnpike and other toll roads to a public corporation has been put on hold until after the November election.

Corzine is concerned that introducing a controversial and complicated “asset monetization” plan in the weeks before a legislative election might foul the political waters for Democratic candidates and jeopardize passage of the plan by the Legislature, administration officials said.

I think this is one of those cases in which the reason it will be difficult to sell is that is it not a sellable idea.

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

E-mail me by clicking here