CALLING FOR A DEBATE ON THE STATE BUDGET

by David P. Rebovich In the week before Jon Corzine was to make his Budget Address, New Jersey’s newspapers ran stories suggesting that the new Governor was still wrestling with difficult decisions about tax hikes and spending cuts. The hottest rumor was that he would propose increasing the sales tax from six to seven percent. But before New Jerseyans could get too worked up about that controversial idea, new headlines had Corzine considering a 60-cent hike in the cigarette tax and breaking his campaign promise to restore rebate checks to their 2004 level and then increase them by 10 percent. Yes, since his inauguration the Governor has stuck to a common theme when discussing the next state budget – the need for shared sacrifice. But when you consider possible tax hikes, pretty firm plans to freeze state aid to municipalities and non-Abbott school districts, and as much as a couple of billion dollars of spending cuts, Corzine is talking about a lot more sacrifice than citizens expected. Especially the folks who voted for him last November. Some observers thought that the new Governor was following the traditional practice of floating several budget balancing maneuvers to see how the public and the state’s political community would react. That’s fine, except for the fact that in last fall’s campaign Corzine tried to cultivate an image of being a leader who will not play politics with serious matters like fiscal policy or personnel decisions. The former CEO of Goldman Sachs claimed that he understands how to manage large, complex organizations, the meaning of a bottom line, and how to make cuts to save money and improve operations. Okay, that does sound a little like traditional campaign rhetoric. And while Corzine did beat Doug Forrester by 10 points, most New Jerseyans were skeptical about both candidates’ promises to balance the new budget and provide more property tax relief by cutting waste, fraud and abuse in government. It turned out that the public was right! In his recent tour of the state to talk about the budget crisis, Corzine told large audiences that he may have lots of business management experience, but he’s not a magician. He also admitted that no special wisdom is needed to understand the budget problem the New Jersey faces. State government simply spends more money than it brings in. Yes, that is an easy problem to understand. But it’s not an easy one to solve, and that of course is what Corzine has to do. Despite New Jerseyans’ recognition that the state has serious fiscal problems – 91 percent said so in a recent Quinnipiac Poll – and their skepticism about Corzine’s ability to keep his campaign promises, it is not clear that they will be readily accept what the Governor will propose to balance the new budget. Perhaps years of “voodoo budgeting” have made folks think that there still must be some gimmicks that can be used to avoid painful spending cuts or tax hikes and that if anyone has any financial tricks up his sleeve, it’s a business wiz like Corzine Or, maybe the Governor is exaggerating the fiscal crisis and the sacrifices that have to be made, in order to make his new budget proposal seem a bit more acceptable. There may be some truth to both of these views. But the overriding reality is that Governor Corzine is facing not just a huge deficit but several competing needs and demands. He must balance a budget that is loaded with mandated spending in the form of entitlements, labor contracts, and state aid programs. His own political philosophy compels him to try to help the truly needy in a state that is one of the wealthiest in the nation. While the size of the budget deficit does seem to require “shared sacrifice,” the Governor has to be careful not to alienate important constituent groups in his party. A related matter is the concern that Democratic legislators have about helping their districts and giving constituents a reason for returning them to office in the 2007 elections. But Corzine also has to demonstrate to the average New Jersey taxpayer that he is eradicating inefficiencies in government operations and cutting ineffective programs. In addition, he must show that he has plans to deal with the very structure of the state budget in which spending has outpaced revenues for several years now. And the Governor realizes that he must try to stimulate economic growth in New Jersey to create jobs for residents and generate revenues for state government so that future spending cuts and tax hikes are not necessary. To have such growth, however, he needs to make the state more friendly to business at a time when some of his supporters want him to raise taxes on businesses, another move that he is considering. Prioritizing these competing demands and determining how to take a balanced approach in dealing with them are extremely challenging tasks. As such, New Jerseyans should have some sympathy for the new Governor and the budget mess he inherited. They also should respect the hard work his transition team did studying the state’s fiscal situation and identifying cost savings and revenue-enhancing measures. And, we should appreciate how Corzine traveled the state to explain the budget crisis and how he would have to make difficult decisions that would be tough on most of the state’s residents. But the state and its citizens would have been better served if these explanations and proposals had been aired, discussed and analyzed during the gubernatorial campaign. Of course the candidates had no incentive to do any of this because they feared they may turn off potential supporters. But perhaps four years from now the state’s media outlets and good government groups can encourage the gubernatorial candidates to participate in a formal debate devoted solely to the topic of the state budget. Candidates could be presented with the current budget, estimates of spending increases in the next fiscal year needed to maintain current programs and state aid packages, a list of their own campaign promises and the costs of keeping them, and revenue estimates for the new fiscal year prepared by the Office of Legislative Services or another independent group. If the candidate’s budget proposals are not balanced, they would be asked to identify specific cuts and revenue sources that they planned to use to bring their plan in line. Given such a debate, gubernatorial hopefuls would not be able to hide behind rhetoric about making tough decisions once in office or counting on economic growth to improve the state’s revenue picture. If such a forum was held last fall, it’s not clear that the outcome of the governor’s race would have been any different. But Corzine, and Forrester, too, would have had to do a careful budget analysis, develop budget balancing plans, and explain precisely who would suffer and who would gain, prior to voters going to the polls. Months later Governor Corzine is about to present his budget proposal, and New Jerseyans still aren’t exactly sure where how they and their friends and neighbors will fare. What is certain, however, is that based on what Corzine the candidate said last fall, an increase in the sales and cigarette taxes, a surtax on corporate income, paltry increases in rebate checks – not a full restoration to 2004 levels -, much higher property taxes, and higher colleges tuition costs will be an unpleasant surprise. After Tuesday’s Budget Address, you won’t need a poll to know that most New Jerseyans will believe that it would have far better if the analysis of the state’s budget situation and the serious, detailed discussion about how to deal with it, had occurred last fall. David P. Rebovich, Ph.D., is Managing Director of the Rider University Institute for New Jersey Politics (www.rider.edu/institute). He also writes a regular column, “On Politics,” for NEW JERSEY LAWYER, monthly reports on New Jersey for CAMPAIGNS AND ELECTIONS, and weekly commentary for CQPolitics.com.

CALLING FOR A DEBATE ON THE STATE BUDGET