State – Page 25 – Hank Kalet

Fiscal follies

More bad news about the state’s fiscal stability from today’s Star-Ledger:

Dwindling assets have pushed the fund that bankrolls unemployment benefits for jobless New Jerseyans to the brink of fiscal collapse, but have stayed just shy of the line that would trigger a $400 million-a-year business tax hike, state Labor Commissioner David Socolow told lawmakers yesterday.

“We are very close to the threshold that would have triggered a tax increase,” Socolow told members of Senate Budget and Appropriations Committee. “We are playing it very close to the edge here.”

Over the past five years, the Unemployment Insurance Trust Fund has plunged from $3.1 billion to its current value of $260 million, largely as a result of regular raids to prop up state budgets. Between 1993 and 2006, lawmakers tapped the unemployment fund for more than $4.6 billion.

So, add the state’s unemployment fund to the long list of bank accounts raided by governors and legislators of both parties over the years to balance the budget (pension, temporary disability) without asking for any sacrifices from anyone — whether they be taxpayers, state workers or the many constituencies who receive money from the state.

The fund, according to Socolow, will be OK so long as the state does not fall into recession. It is due to get a bump in contributions shortly, but that will only get the fund to the minimum level needed to ensure its solvency.

“Any kind of economic downturn puts us into the situation of either having a badly timed increase in business taxes or emptying the fund to the point where we would have to borrow from the federal government and pay a surcharge,” he said.

Not an impending catastrophe, just more of the same in a state that seems to prefer living on credit cards to crafting sane fiscal policy.

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Doing the math

Let’s do some math.

First, 78 percent of school budgets on the ballot yesterday — including all four in the towns my papers cover — were approved. It was the highest approval figure since 2001.

Then add the results of the Quinnipiac Poll released yesterday:

Sparked by increased approval for his property tax reduction plan, the poll results released today are Corzine’s highest ever, and show “little apparent effect from his auto accident,” according to Quinnipiac.

Here are the numbers:

51 – 36 percent approval among more than 800 registered voters surveyed April 10 – 12, before news of his accident was widely known;
52 – 35 percent approval among almost 500 voters surveyed April 13 – 16, or after the accident;
51 – 36 percent overall approval for the entire survey.

Voters approve 71 – 21 percent of the property tax cut Corzine signed recently. The Governor still gets a negative 41 – 44 percent approval for his handling of property taxes, but this is his highest score on this issue, up from 33 – 57 percent February 28.

The numbers, when added together, would seem to indicate that a tax revolt similar to the 1991 purge that gave the Republicans a majority is not in the offing.

But then, the Legislature remains in the red in the poll. But there is another number that probably needs to be added into the mix: the Democrat’s 4-1 financing advantage.

(Rider University Professor David) Rebovich said safe districting and Democratic Party cash advantages will likely prevent any power shift in the coming election.

“Plus, most residents like their individual lawmakers while disapproving of the institution,” Rebovich said.

So much for an angry electorate.

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Ending the pension scam

You hate to have to do something like this, but the people we elect apparently can’t be trusted to make sure that pension contributions are actually used for pension payments. So we’ll just have to take their ability to run the three-card monte away from them.

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A big mess

The governor is calling for changes in the accounting used to track the state’s pension funds, but that may not be enough at this point to avert catastrophe. The changes, which would seem pretty simple (I’m not an accountant so maybe I’m wrong) and would bring the state in line with regular practices, should help give us a more complete picture of the problems we face.

And the problems are huge.
Douglas Love, an investment expert who monitors the retirement accounts as a member of the State Investment Council, said at a council meeting last month his independent analysis of the state’s pension debt puts the shortfall even higher — at $56 billion.

The problems date back to a revaluation of the pensions by Gov. Christie Whitman — and were exacerbated by Gov. Jim McGreevey’s own pension gimmicks.

Initially, the numbers held — but then came the “collapse of the stock market,” which “drained $22 billion from the funds.”

Lawmakers compounded the problem by using accounting gimmicks to skip required annual payments into the funds and to cover billions of dollars in additional costs from increased retirement benefits they granted to public employees.

“The fact is we have a huge hole,” Corzine said. “It has been created by failure to deal with this issue, frankly, for the better part of a decade.”

While Republicans are shouting for reforms on this, they were part of the problem in the first place and injecting politics at this time is only guaranteed to ensure that nothing will actually get done.

Essentially, this is a bipartisan problem that requires a bipartisan solution.

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Faux reform

At least Gov. Jon Corzine knows that the legislation he signed enacting a 20 percent tax credit is only a pebble in the ocean as far as the reforms needed in New Jersey.

“I’d be skeptical too, if I was a taxpayer. Until I see the results, it’s show-me time,” Corzine said, adding that those results will take years to happen. “The reforms take time. It’s not one of those things where you’re going to get instant gratification.”

Certainly not. The fact is that the legislation signed yesterday was a small Band-Aid on a huge problem — property tax bills that are growing at about 7 percent a year and that are already the highest in the nation; a tax system that reinforces the state’s economic disparities; a political system that rewards campaign contributors and ethically challenged legislators; too many towns and school districts; an illogical school funding formula. The list is long.

And it’s why, as the Asbury Park Press points out, the credits are far from the “landmark” reforms touted by the governor and Legislature.

The only thing remarkable about it is how Corzine and the Legislature believe voters will be fooled into thinking it is worthy of the adjective “landmark.” Clearly, they are counting on the gullibility of the electorate. All 120 seats in the Legislature are up for election in November.

Instead of reducing spending by cutting government programs and jobs, and bringing public employee salaries and benefits into the 21st century, they have opted for a shell game instead — demonstrating once again their low regard for the intelligence and attention span of the voter.

Would the Republicans do better? Doubtful. They had a decade in the majority to improve the system and all they came up with was an income tax cut that helped create the fiscal problems the state currently faces.

Jon Shure of New Jersey Policy Perspectives had it right in February when he wrote in an op-ed that so-called reformers dismissed the most logical proposals — an expanded state income tax, realignment of local and county governments — in exchange for what they thought was politically palatable. (Even those proved too extreme for the risk-averse Legislature.)

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.

He describes “real reform” as “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.

And it’s only likely to happen if we empower citizens — via a tax convention — to do the work.

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