Some advice for Jon Corzine

In an op-ed piece I wrote for the Bergen Record on Sunday, January 13, 2008, I observed that Governor Corzine's financial restructuring plan was taking a page out of the state's history. From 1830 until the 1860s, the state relied on a deal it struck with the Camden & Amboy rail line to fund most of the operations of state government. The deal granted the C&A a monopoly on the highly profitable route between Philadelphia and New York. In exchange for this grant, the railroad provided the state with stock in the company and guaranteed it an annual dividend that amounted to over ten percent of the state's operating budget. In addition, the state taxed riders. The total income from this deal provided the state with more than half its annual budget.

The costs were largely passed on to out-of-state riders, who because of the monopoly paid fares that were estimated to be four times higher than comparable rates charged by railroads in states that permitted competition.

Fast forward to 2008 and we see a deal that is very similar. The proposal calls for the state to enter into an agreement with a non-governmental entity, in this case a Public Benefit Corporation (PBC). In exchange for giving up control over the major transportation systems in the New Jersey, the state will reap a monetary benefit that will underwrite vital state functions of state government. We are also told that the burden of the increase in toll hikes will be borne by out-of-state motorists.

The governor also demonstrates that he is an astute student of history by creating a PBC that will lock the in the toll hikes for the long term future. Recognizing that since 1991, when the Florio tax increases were implemented and voters reacted by throwing out the majority party, both executives and legislators have lost the resolve to raise taxes (or in this case tolls) to cover the spending they have approved. The governor's plan takes that decision out of their hands and turns it over to a third party. This move allows elected officials to disavow any connection to these toll hikes. The plan conveniently puts off any toll increase until after the next gubernatorial and assembly elections. This is a clear indictment of the political will and ability of current and future elected officials to do the right thing.

The governor has challenged critics to offer alternatives. Here's one: K.I.S. (Keep It Simple). Rather than create a new agency to borrow $40 billion to pay down $20 billion in debt and fund infrastructure improvement, why not pass legislation or a constitutional amendment that will immediately dedicate regular toll increases to these expenses? This eliminates the costs of borrowing, the creation of another quasi-governmental agency and the additional debt that would be taken on by that agency. In all likelihood the toll increases would also be lower.

If the legislature is feeling bold enough, it could prove the governor wrong and along with regular toll hikes to pay down our debt, cut state spending and pass moderate (and temporary) increases in sales and income taxes to address the state's current fiscal mess.

Does the legislature have the wherewithal to do this? On this count, recent history indicates that the governor is probably right. Some advice for Jon Corzine