STATE BUDGET WAR IS OVER

Friday, July 07, 2006

BY JEFF WHELAN AND JOHN P. MARTIN

Star-Ledger Staff

Gov. Jon Corzine and Assembly Democrats settled their weeklong budget dispute yesterday, signaling an end to the government shutdown that put tens of thousands of New Jerseyans out of work, paralyzed the courts, closed parks and halted gambling in Atlantic City casinos for the first time in history.

With the agreement, Corzine won his battle to raise the state's sales tax to 7 percent, which he called the first step in overcoming "years of failed fiscal policy and one-shot gimmicks" that left state finances in distress.

But he also pledged to dedicate at least half of the new revenue to offset property taxes, a priority for the Assembly speaker, Joseph Roberts (D-Camden), who led opposition to the governor's budget. Corzine said the deal guarantees $5 billion in relief for property owners over the next decade.

Legislators said they would work through the night to finalize details of the $31 billion spending plan and could vote on it later today. Restarting the government would follow. Corzine said the process could take a day or more; the casinos, for instance, might remain closed until tomorrow.

"This is not a time for celebration or elation," Corzine said, announcing the deal in a late-afternoon news conference with Roberts and Senate President Richard Codey (D-Essex). "Far too many people's lives have been disrupted."

The compromise followed a historic week that cost the state millions of dollars, pit the freshman governor against a freshman Assembly speaker, and laid bare the bitter intraparty politics that are likely to be recalled during election season, if voters need any help remembering.

As the two Democrats waged a power struggle over the state coffers, hundreds of thousands of New Jerseyans were unable to collect a paycheck, complete routine tasks such as getting a driver's license, or visit a state park.

Nowhere were the effects as visible as in Atlantic City, where gambling stopped Wednesday when state inspectors were furloughed. The shutdown, which began Saturday and was phased in over the week, cost the casinos as much as $16 million a day, idled tens of thousands of workers and emptied the resort town in the heart of its busiest season.

The state lost $1.3 million in gaming taxes each day, and almost twice that much after suspending its lottery.

Some of the would-be gamblers apparently flocked north to Connecticut, where that state's major casinos deployed extra buses and reported a surge in visitors this week. "It appears that we've had a significant increase," Mohegan Sun spokesman Saverio Mancini said.

New Jersey's racetracks also were forced to halt operations. Monmouth Park canceled racing for the first time yesterday. The Meadowlands canceled its cards for a fourth night.

EERIE QUIET

State beaches and parks were off-limits for a second day, and courts remained closed for all but emergency matters.

At Superior Court in Newark, the state's busiest county courthouse, the hallways were eerily quiet, except for the deputy sheriffs who patrolled the floors, turning away visitors. "Courts are closed today," one bellowed to a visitor who entered the front doors.

Corzine said the state's constitution mandated him to shut down the government when he and legislators couldn't agree on a budget by July 1. More than 45,000 "nonessential" state workers were told to stay home.

Trenton, which had been unusually quiet for most of the week, began to come alive yesterday morning, after Corzine convened the Legislature for the third consecutive day.

Throngs of state employees and casino workers gathered in the Statehouse Annex courtyard for a rally to urge passage of the budget. A sign posted beside the main entrance stairs read: "Trump to Roberts, You're Fired."

The governor's speech to lawmakers hit on largely the same points as his remarks in previous days. He insisted the state was drowning "in a recurring sea of red ink" and urged them to bring him a budget he could sign. But he was more stern, if not weary, drawing a round of cheers and a standing ovation when he pounded the podium and told them, "We can do this today! Today! Today!"

By that time, the seeds of a deal had been planted. The governor had sent a new proposal to the Assembly Budget Committee Wednesday night, one that was slightly different from the compromise Codey brokered earlier in the week.

Corzine has proposed a budget that would raise state spending by about $3 billion but includes $2 billion in spending freezes and cuts, including the elimination of 1,000 state jobs and 75 programs. It also calls for a $1.5 billion payment to reimburse state employees' pension fund.

The latest deal leaves intact Corzine's proposal to increase the 6 percent sales tax to 7 percent, but adds a constitutional amendment -- subject to approval by voters -- to guarantee that half the revenue it generates over the next decade will go to property tax reform. And it makes raising that share above 50 percent a goal in future budgets.

THE BREAKTHROUGH

At noon, Corzine strode into Roberts' office in the Statehouse, heightening speculation that a deal was at hand. As details began to trickle out, some Assembly Democrats painted the proposal as a victory.

"When we heard the (guaranteed) 10 years, we sat down briefly so he (Roberts) could explain what was being said," said Assemblyman Neil Cohen (D-Union). "There became a consensus that we'd moved the ball down the field."

Others said the Democratic caucus was starting to show signs of a divide, fearful of an election backlash this fall. Assemblyman Jeff Van Drew (D-Cape May) disputed that contention, saying the question "was never about being afraid politically." But he said legislators knew it was time to move forward.

"We were going to get to the point where people were literally not going to be able to pay their mortgages and their rents," he said.

Republicans, who as the minority party were left to the sidelines during the dispute, couldn't find much to like about the compromise. Senate Minority Leader Leonard Lance (R-Hunterdon) said the proposal was overloaded with unnecessary taxes and spending. Others agreed.

"When you talk to regular folks, they say they love New Jersey but it's too expensive," said Assemblyman Guy Gregg (R-Morris). "This budget continues that. I think that's tragic as it relates to the average middle-class New Jerseyan."

Senate Democrats had sided with Corzine, but Codey played the role of negotiator between the governor and Assembly speaker. Codey acknowledged the compromise could have been reached 10 days ago, avoiding the showdown and the shutdown.

"It's a fair criticism, but we struggled to find a new wrinkle to put into it, to make it attractive for the Assembly, to join on with us," he said. "That was the problem."

'UNFORTUNATE'

Roberts, who became speaker in January, said he was gratified by the outcome and pleased that property tax reform became a cornerstone of the budget deal.

"We should have all tried to resolve this earlier, and we clearly did try," he said. "It's unfortunate that it took this set of difficulties to get here, but I think this is a very, very fair resolution, good for the state and good for the taxpayers."

Corzine said the outcome was not perfect. He called the deal "a halting first step" and said more changes are needed to prevent the crisis from recurring.

"This absolutely must not happen again," he said. "Our budget process and procedure are flawed and we have an obligation to fix them."

Staff writers Josh Margolin, Susan K. Livio, Tom Hester, Margaret McHugh, Kate Coscarelli and Dunstan McNichol contributed to this report.

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