reform – Page 9 – Hank Kalet

Delaying tactic:Budget puts off necessary reforms

I am trapped in the office, so I didn’t hear the governor’s address. But I have read it and have some thoughts — some of which should be familiar to those who have read my columns over the past year.

The proposed budget offers some good — $300 million to cover an expansion of the state’s earned income tax credit, a nominal increase in aid to schools and towns, money for stem cell and autism research, a reduction in the state workforce through attrition and his call to end “Christmas tree items,” or those spending items tacked on to a finished product without discussion. The rest of the budget address, however, glosses over a single fact: that the governor and state Legislature failed horribly in their attempts to reform state government.

The governor speaks of “$9 million for the new comptroller’s office to root out waste, prevent fraud and reduce spending.” But the comptroller will have few real powers.

He speaks of the new property tax credits — which will offers savings this year, but are unsustainable beyond this year as they are currently constituted.

He speaks of a new $20 million consolidation fund “to provide meaningful incentives for schools and local governments to share services and reduce costs,” but doesn’t acknowledge that the consolidation panel is just advisory and unlikely to result in much real streamlining.

The biggest question mark, however, remains his commitment to “asset monetarization,” essentially using state assets to generate short-term cash. He makes an interesting case, arguing that it represents the only way the state can raise the kind of revenue necessary to provide the programs desired while also offering property tax relief.

The one option that is new and that we are now studying is asset monetization. It’s something that has been implemented in other states and, I can assure you, successfully around the globe. I think it’s fair to say that most governmental entities across the country, led by Democrats and Republicans, are examining its feasibility and appropriateness.

The economic potential from restructuring the state’s interest in our asset portfoliois too significant to ignore, whether that asset is the Turnpike, the lottery, naming rights, air rights, or whatever.

Potentially, asset monetization could reset the state’s finances by dramatically reducing our debt burden, and consequently reducing debt service.

Monetization could free up as much as a billion dollars or more in every year’s budget — long into the future.

Sounds good on the surface, but the potential pitfalls — loss of control over the “asset” (toll hikes and maintenance on the Turnpike and Parkway, for instance) — are hard to quantify. The issue remains how we account for the hidden costs and the nonmonetary costs. The governor address this issue this way:

Make no mistake – with any proposal, we would insist on protective conditions.

If we can’t ensure that the high standards of operations and maintenance will continue, we won’t proceed.

If we can’t ensure public safety will be maintained, we won’t proceed.

If we can’t ensure the state will maintain oversight in the governance of the asset, we won’t proceed.

If we can’t ensure that price increases will be predictable and reasonable, we won’t proceed.

I’m not feeling any more confident about the proposal, nor am I convinced that the choices the governor is taking off the table — income tax increases and streamlining of government — are as unpalatable as he thinks.

A broader-based progressive income tax coupled with a significant reduction in property taxes, forced municipal mergers and regionalization, elimination of county government taken together could go a long way toward fixing our problems.

In the end, “asset monetarization” may still need to be considered — I hope not — but at least we will have forced a reconsideration of New Jersey government before being forced down that path. To sell the Turnpike first will only put off the necessary reforms.

South Brunswick Post, The Cranbury Press
The Blog of South Brunswick
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In the red

If an actuarial report issued today is accurate, the state is in far worse financial shape than anyone appears willing to acknowledge.

The annual actuarial report on the Public Employees Retirement System, the state’s second largest retirement program, shows the total amount of pension benefits for which no money has been salted away soared from $4.5 billion to $7.2 billion as of last June 30.

Filling the gap will cost taxpayers dearly.

According to the report, the state’s contribution in the budget Gov. Jon Corzine is scheduled to unveil tomorrow should be $459 million, compared with the $192 million the current state budget included for the fund.

Local governments, who are paying a total of $218 million into the fund this year, should pay $491 million in their upcoming budgets, the report shows.

The dire news should lend momentum and a sense of moral urgency to the tax reform debate, but is more likely to enflame the current anger directed at public employees over what is seen as extravagant benefits.

There is no doubt that state employees receive top-notch health and retirement plans, along with very generous vacation policies. In the current climate and given the current fiscal mess, it only seems right that employees contribute to the solution with changes in future benefits.

The pension obligation that has been racked up int eh past, however, should not be part of the discussion. It is part of a promise made to state and local employees in past contracts, a moral obligation if you will, and it is incumbent upon every elected official in the state to find a way to ensure that these payments are made.

That’s why tax reform is so crucial. We need to restructure both state and local government to reduce costs and find a better, fairer way to pay for it and one that will be recurring and protected from the kind of politically expedient decisions made by the Whitman and McGreevey administrations to balance their budgets without raising taxes.

South Brunswick Post, The Cranbury Press
The Blog of South Brunswick
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Breaking the chains

The Lawrence Township Council was supposed to introduce an ordinance tonight that would create a citizens committee that would explore publicly funded local elections in the Mercer County town. The committee would study the issue and make recommendations to the council, who would then decide whether to put a taxpayer-funded plan on the ballot.

It is a committee worth keeping an eye on, given the place that money plays in our electoral process.

As I wrote in an earlier column, campaign cash disparities in towns like Monroe and South Brunswick “amplif(ies) the major parties’ strength in both towns and mak(es) it easier for the major parties to attract donors and more difficult for the GOP — a double-whammy that perpetuates one-party politics.”

And the reliance on private donors distorts the lines of accountability, with money creating access and creating the impression — at the very least — that local politicians are on the take, leaving their decisions in question and diminishing our confidence in government.

Public financing — when combined with other reforms — can help break the link. Let’s see what Lawrence comes up with.

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

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Fire district preview: A snafu

I received an e-mail this morning questioning why we didn’t write a preview of the fire district elections in Monroe. The answer? We were unable to track down the budgets and commissioners until after our deadline on Thursday. (We intended to get something up on the Web late Friday, but that fell through the cracks.)

I offer this not as an excuse. The information is public so we had a responsibility to get it.

I offer this as another example of the problems with New Jersey’s governmental structure. There is something inherently wrong with having a government entity — in this case, one that levies taxes — that is as inaccessible as most fire commissions. Our reporters attend occasional meetings, but getting information at other times is nearly impossible — this goes not only for Monroe, but for South Brunswick, Jamesburg, Plainsboro, West Windsor, nearly every fire district that I’ve had the misfortune to have to cover in my 17 years as a reporter and editor.

Monroe is supposed to be reviewing whether to consolidate its districts, maintain the status quo or abolish them altogether. I vote for abolition. At the very least, the independent fire commissions should be required to file all budget information with their municipal clerk’s office, which would make it more accessible for voters to peruse — and reporters to track down.

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

Tax reform, what tax reform?

I offer this commentary from New Jersey Policy Perspective, which arrived via e-mail today, in its entirety and unedited because it is worth reading. I really have little to add.

Whatever it was, it wasn’t tax reform

Maybe the best way to look at the “tax relief” package recently adopted by the Legislature is as the last act of the 2005 campaign, rather than the solution for New Jersey’s over-reliance on local property taxes to pay for government services and educating children.

Such a context makes it a bit easier to understand, and to accept on its own terms while recognizing that this is far from the reform New Jersey needs.

Candidate Jon Corzine ran for Governor with a promise to reduce property taxes, in response to his opponent’s having put forward a plan. In his first year in office, Governor Corzine made it clear that more had to be done to get the state’s finances in order before he could deliver on property taxes. In year two, he and the Legislature will be able to tell most New Jersey households that 20 percent will be knocked off their property taxes. Basing the amount of relief on income makes sense, and for most people we’re talking about a rather meaningful amount of money, at least for as long as the funding source holds up.

But now it’s time to get serious.

The special legislative session that produced 98 recommendations and laid the groundwork for the 20 percent reduction covered a lot of ground. There were flashes of vision and courage when it came to confronting the problems New Jersey inherently perpetuates by dividing itself into so many municipalities and school districts-an 18th century system ill-suited to today’s needs. Unfortunately, some of the boldest proposals (like a pilot program creating a countywide school district) wound up on the cutting room floor in the scramble to find enough votes for the tax relief.

What never seemed to make it into the mix-and needs to be there-is a long overdue, comprehensive look at New Jersey’s tax system. Only when that takes place will we find the way out of highest-in-the-nation property taxes. Often due to political concerns based on perception, not reality, and enflamed by misunderstandings and misrepresentations, key elements necessary for solving New Jersey’s tax mess are not being considered. The state income tax is a good example.

Much has been said about the top rate of New Jersey’s income tax being among the highest in the nation. But rarely is it pointed out that less than one percent of households make enough money to have to pay that rate. In fact, most in New Jersey don’t even pay the rate just below the top rate. Sort all of this out and you find that most New Jerseyans pay lower income tax than if they lived in New York State and much, much lower than if they lived in New York City. Most in New Jersey also pay less than if they lived in Pennsylvania.

The point here isn’t that any taxes in New Jersey are too low. It is, rather, to show there is much to be gained by considering the entire New Jersey tax system and looking for ways to put it in better balance. The income tax is much more closely tied than the property tax to one’s ability to pay. Your income goes down, so does your income tax, but that’s not true with property taxes. The value of your house can rise while income stays the same or falls, and you get a bigger tax bill though you are in no way better able to pay it.

During the debate in Trenton, some folks contended that it makes no sense to lower one tax by raising another. What actually makes no sense is that statement. Raising a fair tax to lower an unfair tax is a very good idea. If Trenton did nothing else that would be progress.

When we get beyond slogans and sound bites, New Jersey is left with this reality: we collect more from local property taxes than from the state sales and income taxes combined. It’s also true that the lower your income is in New Jersey the higher percentage of it you pay in the form of sales, income and property taxes combined. Real reform of the tax system would put all of this on the table. And it would also accept the fact that as bad as New Jersey’s tax system is (and it is) it is really a symptom of the larger problem: 566 municipalities and 613 school districts-an archaic, unsustainable structure more reminiscent of the Ottoman Empire than a 21st century state.

Real reform means looking not just at how much New Jersey spends, but where we spend it and who we call on to pay it. An honest assessment of tax burdens that squarely confronts who pays how much, and in which taxes, would point the way out of the morass. It would recognize the value of raising and spending more of our resources at the state and even county level and less locally. It’s the sort of thing that a tax convention made up of citizens would have no trouble contemplating but which elected politicians keep avoiding.

Whether you want to spend half as much as the state spends now, or twice as much, New Jersey needs a fair, adequate way to raise the money. We don’t have it now and we aren’t much closer to it than we were a month ago.

South Brunswick Post , The Cranbury Press
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