by David P. Rebovich A month ago many Democratic legislators, as well as nearly all the Republicans, were fighting with Governor Jon Corzine, over the state budget. The Governor’s adversaries were asking some simple questions. Why can’t the state make more spending cuts before levying new taxes on an already overburdened public? Shouldn’t any increases in broad-based taxes be reserved to use cover revenues lost from cuts in property taxes? And, wasn’t there going to be a special session of the legislature this summer that the Governor would kick-off with an address containing his ideas about how to deal with the very issues of property tax relief and reform? Well, that session began on Friday, and the Governor certainly had a lot to say about property tax relief and reform. But he didn’t mention anything about hiking any state taxes to provide such relief or reform, at least not for the foreseeable future. Rather, Corzine called for new efficiencies at all levels of government, program evaluations, administrative and structural reforms in sub-state governments, changes in funding formulas, and cuts in government worker benefit packages. Despite the Governor’s matter of fact tone, it was clear to everyone in the crowded Assembly chambers and in the New Jersey Network television and radio audiences that this was as close to a declaration of war against the government establishment as New Jersey has seen. Most of the Governor’s proposals have been forwarded before by legislators from both parties. But never have they been combined to form a comprehensive plan, as Corzine put it, to provide not just some immediate property tax relief but sustainable property tax reform. And, certainly no governor has posited a deadline, and such a short one – year’s end – to prepare legislation that will be controversial. Not because of the goals such legislation but because of the changes in government operations and structures the Governor regards as necessary to help achieve those goals. If New Jerseyans are pleasantly surprised that Corzine is not calling for new taxes, they are nonetheless wondering what happened to the much discussed and ballyhooed idea of having a people’s convention on property tax reform. And, whether the Governor’s plans are actually different from promises by previous governors to deal with the state’s most vexing issue. The Governor was aware that he needed to address these questions. In his address he said that public has a right to ask, what is the difference with this effort” and what exactly he hopes to accomplish. He answered, “action, action, action – now before the end of the year” and that there has been enough studying and talking about property tax reform. Corzine admitted that while he “…would have preferred a citizens’ constitutional convention…if we do our work, we should never need one.” But, he added ominously, “If we fail to take the necessary steps to achieve sustainable relief and reform by January 1st, then I will call and press for a Citizens’ Convention to be on the ballot in 2007.” However, the message seemed to be that if the Democratic legislators who control both the General Assembly and the Senate “fail” on terms posited by a Governor of their own party, they will have a lot of explaining to do when seeking reelection in 2007. What exactly is the Governor proposing? In his words, he is offering a “blueprint of principles and the elements of a plan” that need to be clarified, honed, and detailed through a bipartisan effort by the legislature and with public involvement over the next several months. Corzine’s principles are pretty straightforward. New Jersey relies too much on the regressive property taxes to fund schools and local governments. Spending must be controlled at all levels of government. There are too many layers of government providing similar services. State government’s serious, recurring fiscal problems prevent it from giving more aid to school districts and municipalities. In addition, aid formulas, particularly the school aid formula, is unfair. Given the dramatic increases in property taxes over a twenty-year period – on average over 6 percent annually -, the Governor is calling for comprehensive action now. Such action needs to provide, Corzine insists, both relief and reform that can be sustained. To accomplish this, the state budget must be secure, meaning that revenue must match spending and that spending must be efficient, effective and justifiable. Residents of many areas in the state can be helped by a change in the school funding formula that focuses on giving aid to serve needy school kids regardless of where they live. Immediate relief can also be provided to individuals and families by adding $350 million of the dedicated portion of the revenue from the new sales tax hike for direct property tax relief and replacing rebate checks with tax credits that will lower people’s actual property tax bills. According to the Governor, the most difficult challenges will be implementing the specific reforms he has in mind. Some will likely be unpopular with some residents and groups and will take time to yield tangible benefits to taxpayers. Corzine identified five broad areas to help reduce government spending and keep property taxes down. One is to reform pension and health benefits received by government workers and create a two-tier benefits system of veteran and new employees. Another is to encourage shared services and consolidation among towns and school districts through a $250 million fund created with new sales tax revenue. State government must also take action to reduce its debt to free up funds to use for property tax relief. Corzine supports reducing the $2.3 billion in annual debt service – a figure that will increase in the future – by selling, leasing and naming state assets. In the only hint of possible tax hikes in his address, the Governor wants consideration given to modernizing the tax system, which would include allowing municipalities to use other revenue sources like a local sales tax. To keep spending efficient, effective and legal, he reissued his call for a State Comptroller to audit all departments, agencies and programs. To increase citizens’ control over spending and taxes, he wants school budget elections held on general election day. Lastly, Corzine recommended that property tax increases be capped at 4 percent, much lower than the average 6.9 percent hike in each of the last four years. What were the reactions to the Governor’s address? Despite their disagreements with Corzine over the sales tax hike, most Democrats rallied behind his proposals. They praised the Governor’s call for quick action, even over a people’s property tax convention that Speaker Joe Roberts (5th district) and several Democratic colleagues had strongly supported. Democratic legislators recognized that citizens want relief now, not promises about getting something three or four years down the road. While most Democrats are committed to the concept of progressive taxation, the general feeling on Friday was that taxing your way out of this crisis won’t work and would hurt the state’s economy. Speaker Roberts was especially supportive of the Governor’s initiatives. As Corzine mentioned in his address, he is borrowing some proposals made by Roberts’ in his CORE reform plan that call for consolidation and regionalization of municipal and school services. Bringing government employee benefits in line with those in the private sector is an idea forwarded by Democratic state Senator Steve Sweeney (3rd district) and Assemblymen Jerry Green (22nd district) and Paul Moriarty (4th district). But other Democratic legislators privately expressed concern that government workers, teachers, police and firefighters, municipal and school officials, and small town politicians will likely fight some of Corzine’s reform proposals and try to stop them in the legislature, not the Governor’s Office.The question then becomes, while the Governor has declared war, how many battles will he and his allies be able to win? Several Republican legislators asked that very question and then some. In my discussions will GOP legislators after the Governor’s address, many praised Corzine’s ambition and several of his proposals. Assemblymen Guy Gregg (24th district) and Rick Merkt (25th district) noted that Corzine’s emphasis on cutting spending, reviewing the school funding formula, and growing the economy are right out of their party’s playbook. Senator Peter Inverso (14th district) and Assemblyman Kevin O’Toole (40th district) are both concerned that the Governor did not mention a specific figure, like 20 percent or 30 percent, for the property tax relief he seeks. And, they reiterated the GOP’s desire to have more representation on the legislative committees that will work on reform proposals. Senator Joe Kyrillos (13th district) and Assemblyman Gregg added that changing the school funding formula is crucial to freeing up funds for suburban districts. They hope the Governor and his fellow Democrats have the political will to identify ineffective spending in Abbott districts and remove districts from the program whose tax bases have sufficiently increased. GOP State Committee chair Tom Wilson suggested that large cities can waste a lot of taxpayer dollars and state aid, and the Governor’s plan focused on smaller towns and school districts. And Assemblyman Gregg wryly noted that state government itself is the biggest spender and as such should have its own annual spending increases capped at 4 percent. This year it went up by 10 percent despite the state’s fiscal problems. While these Republicans did show their commitment to the effort to provide residents with property tax relief and reform and to some of the Governor’s specific proposals, they also demonstrated that they have concerns that need to be taken seriously by their fellow legislators this summer and fall. As Assemblyman and Budget Committee veteran Joe Malone (30th district) put it, “Governor Corzine is accessible to us, respectful of our ideas, and has taken them into account when developing his own initiatives.” New Jerseyans would be well served if Democratic legislators this summer adopted Corzine’s approach. And, if Republicans worked on turning their constructive criticisms into reform proposals as well. This war won’t be won unless there is significant bipartisanship cooperation and agreement on the battle plans. 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 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.