by David P. Rebovich It will all come down to economic growth. That’s what I blurted out when Jonathan Tamari of Gannett New Jersey asked me if Jon Corzine can turn things around after the new governor’s difficult first 100 days in office. This was hardly a profound response. Nonetheless, it is important for New Jerseyans, especially those who voted for Corzine last November, to realize that in the Governor’s broad policy perspective, it is economic growth that will enable New Jersey to overcome the fiscal problems he inherited and the political ones he now confronts because of his controversial budget proposal. This focus on economic growth, however, does raise some questions. Can Corzine really do much to encourage investment in a high cost, high tax and highly regulated state like New Jersey? If he can, will he be able to do so quickly enough to help him balance future state budgets without having to recommend more tax hikes or unpopular spending cuts or freezes in state aid? And, if anticipated economic growth will provide much needed tax revenue for the state, does it make more political sense to take a pragmatic approach to the new state budget rather than ask for so much sacrifice from citizens? A pragmatic approach is a polite way to describe the practice of balancing the state budget with one shot revenues, fund transfers and borrowing, by avoiding some necessary spending, and hoping for better yields from sales and income taxes. In the last decade both parties have used this approach. This year Democrats in the legislature are under enormous pressure from constituents to amend the Governor’s budget proposal. Many Democratic lawmakers are worried that if they don’t, their party will pay the price in the 2007 midterm elections when every seat in the senate and general assembly are on the ballot. It is understandable that Democratic legislators are concerned about their reelection prospects. But at some point New Jersey’s Democrats – those in office and in the ranks – need to come to terms with two points. One is that their party has become of a victim of its own success. With 49 assemblymen and 22 senators, today Democrats represent more constituents from more districts in more parts of the state who hope to be satisfied by lawmakers who they supported at the polls. The second point is that the party’s policy perspective rests on precepts that are hard to adhere to when money is tight. First is the belief in an activist government that should address social and economic problems and pursue worthy public goals. Then there is the notion that people, from the unemployed urbanite to the tax-weary upper-middle class suburbanite, are entitled to assistance from government, especially if they are part of the Democratic coalition! But when Democrats are in power and revenues are down, they have some hard choices to make. Precisely how “activist” can government be and whom – which constituents, exactly – are more “entitled” than others? Governor Corzine seems to believe that his party is at the point where these questions have to be asked and answered. State government does not have the money for Democrats to appease all of their supporters. And, gimmicks used to balance the budget do more harm than good. As such, state officials need to do what is necessary to restore fiscal integrity, by which Corzine means honestly balancing the budget, even if this requires tax hikes and considerable belt-tightening. Fiscal integrity and stability will presumably make New Jersey more attractive to businesses who will not feel that tax and fee hikes are likely to be sprung on them or that programs that support economic development will be in constant jeopardy due to budget uncertainties. And more economic growth, spurred by policy decisions and targeted investments made by state government, will yield more revenue that will presumably enable Corzine and the Democratic legislature to return to their activist ways and to address constituents’ needs that for the time-being have been put on hold. But when one considers some other suggestions that the Governor has for helping the state achieve fiscal integrity, it seems that he is moving beyond the activist-entitlement precepts and broad policy paradigm that have defined and guided his party. In fact, Corzine’s ideas for how state government, municipalities and school districts can save money are unconventional for New Jersey Democrats. And these unconventional ideas may well be more disturbing to Democratic legislators, local officials, and constituents than his calls for tax hikes, program cuts, and freezes in state aid. For starters the Governor wants to revamp pension and health care benefits for non-unionized state workers. This move is considered to be a precursor to asking new unionized state workers to accept less lucrative pension and health benefits plans. He also is calling for the consolidation of smaller school districts and municipalities and for the regionalization of more services to cut costs. Corzine also joined some Republican legislators in suggesting that the Abbott school districts needed to be evaluated to determine if some districts should be removed from the program due to their improved local tax bases, or at least required to make a larger local contribution to their school’s costs. Like the growing chorus of legislators on both sides of the aisle, the Governor is wondering why education outcomes are not better in districts that spend thousands of dollars more per pupil than the state average. In addition, this Democratic governor decided not to increase income tax rates on the well-off or hike business taxes. Instead, he opted to recommend a one point increase in the state sales tax – a regressive levy-, cuts in several programs, and freezes in state aid to municipalities and schools. He also hopes to be able to freeze state aid to the Abbott districts, too. In the face of a big budget deficit, Governor Corzine has decided to deemphasize his party’s historic commitment to an activist government and to the notion of entitlement and instead focus on fiscal integrity and the state’s long-term economic well-being. To achieve both of these goals, several key elements in the Democratic Party coalition are being asked to sacrifice, including educators, some urban property tax payers, suburbanites used to “home rule,” and current and future government workers. Let’s not forget other New Jerseyans who will see their property taxes increase and funding for programs they regard as important pared. No wonder so many folks are concerned about the state’s fiscal situation and Democratic legislators are worried about their political futures. Just about everyone is beginning to wonder how long the kind of sacrifice the Governor is asking for will be necessary. That’s a hard question to answer. Corzine has said that he hopes to make the state attractive to investors in knowledge-based industries, like pharmaceuticals and biomedical research, telecommunications, and financial services. The business community has praised his amendment of the corporate business tax, his proposed Edison Innovation Fund, and his interest in streamlining the state’s cumbersome regulatory process. But many knowledge-based industries are looking to the state to support more research and development at colleges and universities, something it cannot afford to do at this time. Economists note that in recent years New Jersey has lost several thousand jobs in the high-tech sector and that regaining them in a highly competitive environment will neither be easy nor occur quickly. What this seems to mean is that New Jerseyans will have to make budget sacrifices for some time and consider some larger reforms involving their municipalities, school districts, government workers’ compensation, and perhaps state government service responsibility. That would represent not a only just a new policy paradigm for the state’s Democrats but a new paradigm for New Jersey. David P. Rebovich, Ph.D., is Managing Director of the Rider University Institute for New Jersey Politics (ww.rider.edu/institute). He also writes a regular column, “On Politics,” for NEW JERSEY LAWYER and monthly reports on New Jersey for CAMPAIGNS AND ELECTIONS Magazine, and is a member of CQPolitics.com’s Board of Advisors that offers weekly commentary on national political developments.