taxes – Page 12 – Hank Kalet

The mirage of reform

The Star-Ledger today offers a summary of the state’s tax reform effort that presents the last half year in a somewhat better light than I would.

Of the 98 recommendations made by four special joint committees, the paper says that about half were enacted as law. And while that maybe true from a technical standpoint, the most important were not and many of the other controversial items were either watered down in committee or between the release of the reports and the passage of the legislation.

Take the consolidation bill. The one that became law essentially created an advisory panel with authority to study the issue, but left the final decision to voters in the communities to be merged. Normally, I would never oppose giving voters a choice, but the history of municipal and school consolidation is one of failure and inaction, caused only partly by fiscal considerations. Other tangential issues — red herrings like the amorphous “identity,” as if villages like Kingston that are not independent municipalities lack identity — have come into play keeping the expensive array of overlapping and repetitive governments in place.

The bill originally on the table would have addressed that by giving the state Legislature and governor final say — the merger panel would recommend towns to consolidate and the state would act. That would have been infinitely better.

Go down the list: The ban on dual-office holding? Still waiting. New school aid formula? Wait until next year. State comptroller? Sort of — a far weaker comptroller was created than proposed.

The Legislature did manage to create a new, executive county superintendent — a silly idea that creates a new level of bureaucracy — and impose a set of tax levy caps destined to do little more than hamstring local governments and schools. Our best hope for the caps is that they create momentum for greater shared services and mergers — if you can’t spend, after all, you have to find other ways of providing services.

How would I grade the governor and Legislature at this point? I’d give them an incomplete — and make no mistake, this grade applies equally to Democrats and Republicans.

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Dispatches: Waiting for the rules to change

Today’s Dispatches is up — on the impact that the state budget might have on local school districts.

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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.

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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.

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Toll sale would take its toll

The debate on selling off the state’s toll roads has begun.

The Assembly Transportation Committee began hearings today to discuss the misbegotten proposal — with many of the members rightly pointing out how it is less likely to fix our debt problems than exacerbate them.

Assemblyman John Wisniewski, D-Middlesex, the committee chairman, warned that any “monetization” plan would be similar to past borrowing schemes that have led to the state’s crushing debts. Selling or leasing state assets is now being promoted as a way to ease those burdens.

Wisniewski said a long-term privatization plan would still leave the public on the hook for billions of dollars of debt through higher tolls.

And this does not take into account the potential maintenance issues associated with a privatization plan.

As I’ve said before, end this debate now before we talk ourself into doing something dopey.

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