DEMOCRATS’ BUDGET CRISIS HAS DEEP ROOTS

by David P. Rebovich Hit the mute button on your remote, close your eyes, and let your imagination take you to October of 2007. Listen carefully, and you will hear a rich baritone voice intone the following. “They promised you tax relief and ethics reform. But in the last six years that they have held power in Trenton, New Jersey’s Democrats have given you tax hikes, cronyism, and broken promises. Property taxes have soared by over 30 percent. Rebate checks have been cut in half. And when faced with another multi-billion dollar budget deficit of their own creation, what did the Democrats do? They raised the sales tax instead of cutting wasteful spending and jobs for their political allies. No wonder businesses are leaving the state and more people find it harder and harder to make ends meet. The only way to end this mess? Vote for Republicans for Assembly and Senate and say ‘no’ to the Democrats’ destructive policies.” If you were wondering why there is a standoff between the Governor and the state legislature over the budget for fiscal year 2006-2007, it’s because Democratic legislators fear a campaign next year in which Republicans run ads like the above. This fear came to a head late last week when Assembly Democratic leaders told Governor Jon Corzine that their members would not support the one-cent increase in the state sales tax he proposed in the new budget. Rejecting the sales tax hike is a serious political blow to the new Governor who has spent months trying to sell his tightly crafted, controversial proposal to the public. In practical terms, rejecting the sales tax hike creates a $1.2 billion hole in the budget that must be filled by either increasing some other taxes, cutting spending, or doing some combination of both. None of these options are pleasant or easy. And, with the new budget required to be signed by July 1st, lawmakers do not have much time to decide what to do. How did the Democrats get themselves into this situation, one which may cause some New Jerseyans to think that the party in power is disorganized and not up to the task of governing during these tough times? There are several explanations, including the different perspectives of the branches of state government and constituencies they represent, the fact that Corzine is a political newcomer to state government, and the possibility that his budget may be too austere. But, the most basic reason the Democrats have a crisis about the next budget is that they have for too long told their constituents that extensive government spending is possible because someone else, e.g., the rich, the business community, people in the next town, will pick up the tab. If not, the bill can simply be covered by some painless budget maneuver. Well, those days are gone, and Democrats are bickering over what to do about it. To his credit, Governor Corzine has criticized his own party for irresponsible budget practices that hid the painful truth and said that he is willing to face the political consequences of taking corrective action. This is a big, lofty, and long-term goal, one that chief executives may adopt for themselves and that legislators, even those in the governor’s party, are likely to resist. By virtue of his broad constituency and four year term, a governor can be concerned about the problems and needs of the entire state and its long-term well-being. However, legislators are more likely to focus on their own districts and what their constituents need and want now. While running for reelection, as in the fall of 2007, incumbent senators and assemblymen do not want to talk about how they acted like statesmen and supported noble causes. That could sound like an excuse for failing to bring funds and programs from Trenton to help the folks back home. But Jon Corzine ran for governor as an outsider with the blessings of the very people who are now bucking him for trying to live up to at least some of his campaign promises. Corzine said he would help New Jerseyans move beyond the politics of patronage and fiscal irresponsibility that drove up the cost of government, offended citizens’ ethical sensibilities, and prevented the achievement of important policy objectives. In supporting Corzine for their party’s nomination for governor over one of their own – Acting Governor Richard Codey -, Democratic legislators recognized that they needed a candidate who could credibly argue that he was not part of state government’s ethical or fiscal quagmire that citizens associated with the party in power. But did those Democratic leaders want merely an attractive candidate who would enable their party to hold on to the governor’s office and then be a figurehead? Or, did they want someone who would help them reform their ways? When Corzine – who was a U.S. Senator and didn’t need a new job– campaigned on restoring ethical integrity to Trenton, citizens were be inclined to give him the benefit of the doubt. When he claimed he would use his extensive business experience to balance the state budget honestly, citizens were hopeful. After all, this former CEO wouldn’t have an excuse if he fouled up the budget. When Corzine took office, he showed that he wasn’t kidding when he was campaigning. He called for comprehensive ethics reform, something that lawmakers have managed to avoid. Then he proposed a budget that was not as revolutionary as he claimed but did make some progress reversing the controversial fiscal practices of his Democratic and Republican predecessors. While spending would be increased, in large part because of mandates, so would revenues. The state would no longer rely on gimmicks to cover multibillion dollar deficits. But the problem with Corzine’s budget proposal was, of course, its political consequences. Many governors have proposed budgets that contained bad news in the form of tax hikes and spending cuts. However, to make the bad news a little more palatable, they have typically recommended some popular new programs or funding increases for some existing ones. Governors have done this for their own political good and to give legislators, who after all must pass the budget, reasons for supporting the proposal. Corzine did not follow this formula. While there was bad news, in the form of higher taxes – especially the sales tax -, and spending cuts and freezes to higher education, towns and school districts, there was very little good news, conventionally understood. When asked what the good news was in the plan, Administration officials deadpanned that the new budget will put the state on the path toward fiscal integrity. This is a praiseworthy goal to be sure, and one that may earn Corzine a big chapter in the state’s political history. But fiscal integrity is not likely to be an effective campaign theme if you are a Democratic legislator running for reelection next year. This still leaves the serious question of what would make for a good new state budget and, yes, one that Democrats could campaign on next year. In the new world of gimmick-free budgets and citizens’ resistance to pay higher broad-based taxes, Democratic legislators have a big problem. The may want to avoid making any cuts to an already lean budget proposal. But they don’t want to support a sales tax increase which polls show is unpopular with most New Jerseyans. This means that the Democrats will have to find another billion bucks in order to balance the new budget. Where can they find that kind of money? Well, Corzine and the legislature can rescind the entire rebate program, or part of it, from the budget and save a fortune. A popular move? Hardly. They can cut the Governor’s initiatives for the needy and save a few hundred million dollars, so that middle class taxpayers can keep a few more bucks in their pockets. They can decrease, or even forego, the state’s long overdue payment into the government workers pension fund. But this would perpetuate the state’s fiscal problems rather than take a step toward alleviating them. They can support the recommendations of Sen. Steve Sweeney and Assemblymen Paul Moriarty and Gerry Green to ask state workers give back upwards of 15 percent of their salaries and fringe benefits. The Democrats can also increase income tax rates on higher earners, despite the Governor’s concern that such a move would have harmful economic consequences. And, they can look at the list of cuts the Assembly Republicans have been recommending on their web site for months now. No matter what the Democrats ultimately decide to do to balance the new state budget, they are likely to make some political enemies. You have to wonder if the Democrats wouldn’t be better off simply stating that their party believes that the common good requires that the state have certain programs with certain levels of funding, and that most folks may have to pay a little more in taxes and fees. If New Jersey’s Democrats are afraid to make that argument or don’t know how to, the party has a bigger crisis on its hands than how to balance the new state budget. David P. Rebovich, Ph.D., is Managing Director the Rider University Institute for New Jersey Politics (www.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. He is a member of CQPolitics.com’s Board of Advisors that provides weekly commentary on national political developments.

DEMOCRATS’ BUDGET CRISIS HAS DEEP ROOTS