Corzine prepares a new fiscal order

Governor to make broad proposals today that stress link between property taxes and budget woes

Friday, July 28, 2006

BY JOE DONOHUE AND TOM HESTER

Star-Ledger Staff

Gov. Jon Corzine today will unveil far-reaching proposals to ease New Jerseyans' property taxes and the state's chronic budget problems, including adding hundreds of millions of dollars in aid to suburban schools and possibly selling the New Jersey Turnpike to cut the state's debt.

With the state suffering from annual budget shortfalls and its homeowners struggling to pay tax bills that average nearly $6,000, Corzine has decided a bold, comprehensive plan is needed to address both problems, several Statehouse sources said.

The former Wall Street investment banker's prescriptions for New Jersey's fiscal ills include tighter cost controls at all levels of government and less generous fringe benefits for state workers. He will propose direct state credits on local property tax bills and an incentive fund to encourage towns to share services.

The governor's speech will kick off a special legislative session dedicated to reducing the pain of the property taxes, which pay for local government services and public schools.

Corzine will emphasize connections between the state government's money problems and the burden on local taxpayers, aides said yesterday.

Nearly half the state budget already goes to municipalities, counties and school districts, and Corzine is expected to argue the state would be hard-pressed to increase that aid unless it drastically reduced other expenses -- such as the $2.8 billion in annual payments on the state's debt.

The governor will direct Treasurer Bradley Abelow to study the idea of selling or leasing large state assets -- like the Turnpike or the State Lottery system -- and using the proceeds to pay off a big chunk of the $33.1 billion state debt, according to an administration official and a legislative source.

Spokesman Brendan Gilfillan would say only: "The governor will speak to a variety of factors that are behind increasing property taxes and will focus on delivering real reform to New Jerseyans, who have dealt with this burden for far too long."

According an administration source, Corzine will recommend using technology that will be available by the next budget year to directly lower local property tax bills by issuing tax credits. The source did not indicate whether the credits would replace rebate checks, a move that could save more than $10 million in administrative costs.

The governor also is expected to propose that state aid for education be distributed based on the number of poor and special-education students in each district, according to sources who were briefed by administration officials. The plan would not reduce aid to the 31 mostly urban "special-needs" districts but could distribute close to $1 billion to nearby districts that are nearly as strapped and to suburban districts for their special education and poor children.

To address the rising costs of state worker benefits, Corzine will recommend consideration of a two-tiered pension system that retains the vested rights of current workers but introduces changes for new hires, such as 401(k)-style plans and a higher retirement age.

Corzine also will seek to dedicate $250million from the newly increased state sales tax for a "re-engineering fund" to provide financial incentives to schools and local governments that share services and reduce costs.

To further constrain the cost of government, Corzine will propose tight caps on either tax increases or budgets, officials said.

As part of the special session, the Senate and Assembly plan to appoint four joint committees to focus on changing school funding, consolidating local services, controlling employee benefits and possibly promoting a "citizens convention" to write tax reform into the state constitution.

Senate President Richard Codey (D-Essex) yesterday introduced a resolution forming the four committees and requiring them to report to the governor by Nov. 15 unless an extension is jointly approved by Codey and Assembly Speaker Joseph Roberts (D-Camden). Each panel will have eight Democrats and four Republicans, with equal numbers from the Senate and Assembly.

Although it was part of his election campaign platform, Corzine is not expected to emphasize a citizens convention, because Democratic lawmakers are concerned about putting such a controversial question on the ballot next year, when they will be seeking to keep their majorities in both houses.

Two legislative committees heard testimony yesterday on a constitutional amendment to dedicate a half-cent of the 7-cents-per-dollar sales tax to property tax relief. This year, that would amount to $600million. That tax relief measure was part of an agreement ending a budget stalemate between Corzine and Roberts that forced a weeklong state government shutdown earlier this month. The proposed amendment is expected to clear both houses of the Legislature today, and the final say would be up to voters in November.

Democratic lawmakers described the proposal as a "down payment" on property tax reform. "People are frustrated with property taxes and they are demanding results," said Assemblyman Jack Conners (D-Burlington).

But Republicans said Democrats should have spelled out exactly what they plan to do with the money so it won't become a political slush fund. "I think it's a big ruse. Meaningful property tax relief has to come from cuts and not just moving shells around on the table," said Assemblyman Sean Kean (R-Monmouth).

Also yesterday, Sen. Stephen Sweeney (D-Gloucester) and Assemblyman Paul Moriarty (D-Gloucester) said they will push legislation to reduce the cost of fringe benefits to state and local government workers by 15 percent. Their proposals include raising the retirement age, now 55, to 60 for new employees, eliminating lifetime health benefits for new employees and their dependents, and abolishing the practice of paying for unused sick time and vacation days. Sweeney and Moriarty also want to mandate a 40-hour week for new employees.

Sweeney, an ironworkers union official, drew the anger of state worker unions when he went public with a number of the proposals during the budget crisis. But he said the public feedback was encouraging: "We have received thousands of e-mails and fielded hundreds of phone calls from taxpayers throughout the state voicing support for these measures."

Joe Donohue covers state government and politics. He may be reached at jdonohue@starledger.com or (609) 989-0208.

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