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1-11-10 Transition News
Gannett/Asbury Park Press'With few options, Christie faces state budget deficit'.......................... 'On a farewell note, Corzine highlights his social policies'/Statehouse Bureau

'New Jersey towns face crash diet of budget cuts' /The Star-Ledger

January 9, 2010

With few options, Christie faces state budget deficit

Rebate, no-tax-hike pledge limit choices


As a U.S. Attorney, Chris Christie took on mobsters, crooked politicians and New Jersey's infamous culture of corruption.

That seems simple compared to the task Christie now confronts: balance a state budget that is projected to be $9.5 billion in the red. That's equal to about a third of the current budget.

When he is sworn in as governor Jan. 19, Christie will have less than two months to get the state's fiscal house in order. He must present his first budget to the Legislature on March 16.

Unlike the federal government, which routinely spends more money than it takes in, New Jersey's constitution mandates a balanced state budget.

"This is not a fun time to be governor, to say the least," said James W. Hughes, a Rutgers University dean and public policy expert. "Just to survive, there are going to have to be significant budget cuts."

Projections of multibillion dollar deficits prior to the introduction of the state budget each year are as common in New Jersey as robins in the spring. Past governors have closed the gaps through tax increases, cuts in programs, federal aid and so-called one-shot budget tricks that raise hundreds of millions of dollars from unique revenue sources.

Last year, for example, Gov. Jon S. Corzine raised $725 million from a tax amnesty program. He used the money to restore property tax rebates for many property owners.

When Corzine took office in 2006, the budget gap was estimated at slightly more than $5 billion. Even though Corzine actually reduced the size of the state budget during the last two years of his term, the worst national economy since the Great Depression has driven down New Jersey's revenues and left the state in even worse fiscal shape.

Quite simply, New Jersey continues to spend more money than the state receives in tax revenue. It is a structural deficit that the state's Office of Management and Budget predicts will continue "absent strong action."

More fees?

"I think (Christie's) first job is to go through all the cushions and sofas in Drumthwacket and see if Gov. Corzine left anything behind," joked Joseph Marbach, dean of the College of Arts and Sciences at Seton Hall University.

Short of finding several billion dollars in spare change, Marbach said it will be difficult for the new governor to balance the state's budget without raising taxes.

"What will likely happen is that various fees will be increased," Marbach said. "They're not taxes, all the fees for various government services, and those are things you can sell to the public because it's a payment for a service you are using. If you're not using that service, than you don't have to pay for it."

Christie so far has ruled out tax increases and promised not to cut state aid to local school districts. He also pledged to restore property tax rebates for those earning more than $75,000, a limit imposed last year by Corzine as part of his efforts to close a $4 billion budget gap. Christie's promises may leave him with little room to maneuver when it comes to balancing the budget.

State aid to education, including contributions to teacher pensions, was $11.4 billion for fiscal year 2010, more than a third of $29.8 billion total budget.

Joseph Henchman, director of state programs for the nonpartisan Tax Foundation in Washington, said the Christie administration should consider expanding the sales tax to items like clothing and groceries.

"Something needs to be done with the revenue volatility," Henchman said. "Over the last 30 years or so, it's quite dramatic. It's a roller coaster I would not ride."

The reason for the sharp spikes and drops in state revenues are New Jersey's reliance on high income earners to pay the bulk of its income taxes, its heavy dependence on corporate taxes and its decision to exempt necessities such as clothing from the sales tax, Henchman said.

Corporate earnings, as well as the wages brought home by those at the top of the income tax tier, tend to fluctuate widely with swings in the economy, Henchman said. The deep recession of the past 18 months has caused steep drops in income, corporate and sales taxes, leading to an even bigger budget deficit.

Financial emergency

Toms River resident Victor Antonelli, 70, said he supported Christie in the general election and expects him to take on the state's employee unions to reduce costs.

"The first thing he's got to do is attack the pension system because it's out of control," Antonelli said. "Also, the state government, the way it is run today, there are simply too many people on the payroll."

It seems likely that Christie will forgo the state's contribution to the employee pensions this year. Corzine's fiscal year 2010 budget gave $400 million to the pension funds, but from 1997 to 2005, no money was set aside for pension payments.

Published reports have stated Christie is considering declaring a financial emergency in the state, a move that could allow him to layoff some of the 74,600 state workers, who are paid a collective $2.9 billion in salaries and wages. Last year, Corzine considered such a move before negotiating a deal with the state's largest employee union, the Communications Workers of America.

Under the deal, the union agreed to take 10 unpaid furlough days while deferring a wage increase. The agreement included a no-layoff pledge by Corzine through December 2010; if layoffs occur, a 3.5 percent raise due in January 2011 would be due immediately.

Christie has said he will not be bound by the terms of Corzine's deal with the union.

The problem with cuts, of course, is residents are likely to howl if it impacts state services. When Corzine proposed closing the Agriculture Department and shutting down nine state parks in 2008 to save $4.5 million, the public protest caused him to abandon his plans.

"New Jerseyans want Mercedes Benz-level services, and they don't even want to pay Kia prices," Rutgers' Hughes said. "The basic reality is, both as a nation and as a state, we have been living a lifestyle we can no longer afford. There are going to be wrenching adjustments that have to take place."


On a farewell note, Corzine highlights his social policies

By Claire Heininger/Statehouse Bureau

January 09, 2010, 11:00PM

For four years, Gov. Jon Corzine was strictly business, all hard numbers and wooden delivery.

On his way out of office, he’s going for the heart.

In his farewell speech, Corzine plans to highlight his record of improving the lives of children and families in New Jersey, a legacy that includes reforms in child welfare, school funding, school construction, preschool and children’s health care, according to people familiar with the speech.

The Democratic governor, unseated by Gov.-elect Chris Christie in November, will also use his final State of the State address on Tuesday to urge policymakers not to abandon the next generation in dire economic times.

"We’re very proud. Our kids are doing better than almost anyplace in the nation in their performance," Corzine said last week. "I think we’ve made a lot of progress. It’s a challenge to keep that going. ...This is going to be a tough fiscal year, and we have to make tough choices. I hope that our kids are not one of those deficits that we create."

After four turbulent years that saw him shut down government, enact ethics and property tax reforms, nearly die in a car crash, and pitch an ambitious but failed plan to cut state debt through highway tolls, Corzine became the third governor in the past 60 years to lose after a single term. Christie, who portrayed Corzine as a failed financial guru, takes over Jan. 19.

Never big on speechmaking or self-aggrandizing, Corzine has made himself scarce since his defeat and has not revealed his future plans. But when the former Wall Street executive faces both houses of the Legislature for the final time, he plans to use the last of his limelight on a cause that helped draw him to politics in the first place: the social safety net.

"The common thread in his years in public service has been protecting kids and those who don’t have a voice," said health commissioner Heather Howard, who has worked for Corzine for nine years. "This is his true passion and it is what motivated him to get into public service. He’s returning to that at the end because that is his lasting legacy. These are structural reforms that are going to benefit not just today’s kids, but kids in the future."

The 63-year-old Corzine will touch on other broad themes of his administration including property tax relief, ethics reforms, and fiscal responsibility, all priorities when he took office in 2006. But while those areas are marked by halting progress — Corzine acknowledged during the campaign he got only halfway to some of his goals, and others were swallowed by the recession — the social policies are more clear-cut successes, advisers say.

"People are still feeling the pain of the economic collapse right now, and they don’t see those things," said Harold Hodes, a top Democratic strategist who worked closely with the governor. What is clear-cut, Hodes said, is that "he cares very deeply about the people of New Jersey."

Corzine also plans to strike a gracious tone towards Christie in the aftermath of their negative campaign and shaky transition handoff.

"The outgoing governor is really speaking without power, so he’s not going to step on the toes of the incoming governor," said Don Linky, who leads the Program on the Governor at Rutgers University. He added that with time, the public’s view of all governors "tends to mellow."

Former governor Brendan Byrne, who survived public scorn to win a second term, said his transition to senior statesman was smooth because his accomplishments "were very easy to dramatize": opening Atlantic City to casinos, overseeing construction of the Meadowlands and preserving the Pinelands. Corzine’s biggest achievements — such as changing New Jersey’s school-funding formula after a 40-year court battle — don’t have a simple translation, he said.

"Pinelands is easy to put on a tombstone, and having educational dollars follow the child is a little tough to put on a tombstone," Byrne said. "Not that he or I are worried about that."

Corzine plans to link together pieces of his record including:

Winning legislative and state Supreme Court approval for a new school-funding formula that distributes state aid based on enrollment.

Implementing court-mandated reform of the state’s child welfare system, including creating the Department of Children and Families, after a series of cases of abuse and neglect.

Signing legislation ensuring access to affordable health insurance for all children, as well as paid family leave for workers caring for a new baby or sick relative, and increased insurance coverage for children with autism.

Increasing spending on public preschools, following a court mandate to provide it in the poorest districts, and authorizing $3.9 billion in state funding for new schools.

Child advocates who worked with Corzine say he was driven by necessity — such as court orders on child welfare and preschool — as well as liberal political principles and human concern.

"We’ve been involved in a lot of lawsuits around the country, and we’ve had court orders against other governors, and I have not seen any state, any governor make the same kind of sustained commitment as I’ve seen with Governor Corzine," said Marcia Robinson Lowry, executive director of Children’s Rights, the advocacy group that sued the state.

Corzine, sometimes awkward or dispassionate in other environments, "lights up" around children, Howard said. That was evident in the weeks after the election, when Corzine rarely appeared in public but for events with needy children by his side.

"That’s him at his finest hours, because it was real," Hodes said. "I think he cares about the legacy."

New Jersey towns face crash diet of budget cuts

By Philip Read/The Star-Ledger

January 09, 2010, 10:00PM

The furloughs are business-as-usual in Maplewood, so much so that they wind up listed under "Events" on the suburb’s official website.

There will be 12 more of the monthly unpaid days off this year. There’ll be rolling summer library closings, too. Add those to the 22 staffers laid off — 10 percent of the municipal work force — and its pedestal on Money magazine’s list of "one of the best places to live in America" looks frayed.

. He says it would be inconvenient for him if they closed the branch because he lives nearby and doesn't drive yet.

The crash diet in this Essex County Township isn’t likely to end anytime soon after Gov.-elect Christopher Christie on Wednesday warned New Jersey’s already cash-strapped municipalities that state aid would be reduced in the coming fiscal year. The sobering reason: The state could run out of money as early as March.

The cuts -- coupled with the fallout from as much as a 25 percent rollback in state spending -- are likely to force towns to reconsider what services they can provide.

"We have been living far beyond our means — living a lifestyle of municipal and educational services beyond our economic capacity," said James Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University. "There is no painless silver bullet to get back on track. The question is not, ‘When will things get back to normal?’ but rather, ‘What will the new normal be?’

"There may have to be significant service downsizing in adjusting to this new normal," Hughes said.

That is likely to translate into a debate about what a municipality considers a "core" service versus a "discretionary" one.

Traditionally, municipalities have provided everything from road repairs to snow cleanup, from libraries to community centers, tennis lessons to summer beach events. Kevin Sluka, the administrator in Somerville, said these usually aren’t luxuries, but some services towns typically provide are not mandated by law.

New Jersey towns might forgo recreation departments, for example, since they are not mandated, said Sluka. "Dog licenses are mandated. Cat licenses are not," Sluka said. "Is there a benefit to knowing what your cat population is? Service is not the driving factor. Economics is."

Somerville is eliminating its health department and folding it into Somerset County’s office, a fate that might await the library after a blue-ribbon committee specifically weighs in on a merger, he said.

"I think it’s going to be bad," Sluka said of the coming year.

Like Somerville, many New Jersey towns pump more money into their libraries than required under a state funding formula.

Montclair, for one, contributes $3.78 million to its two-branch system, $1.3 million more than the minimum. If Montclair loses $1 million in state aid, that budgetary line can pop off the page, and some may question the expenditure.

"I don’t mean to pick on the library, but it’s such a big number," said Joseph Hartnett, the township manager.

To Vic DeLuca, Maplewood’s mayor, rising health insurance premiums, up 18 percent in Maplewood’s case, and pension obligations, up an extra $1 million there, are colliding with falling revenue from tax appeals born of a declining real-estate market. Kick in the state’s 4 percent tax cap, and the prospect for state-aid cuts, and there’s no alternative but to cut into payrolls and services.

"Nothing is sacred anymore," DeLuca said. "The bulk of state funding goes to state aid, the bulk of the budget. We’re at the end of the pipeline."

It is against this backdrop that the idea of "shared services" is taking on new urgency.

Montclair, Hartnett said, has been in discussions with smaller towns about merging everything from courts to police forces. In Maplewood, DeLuca said, the final touches are being put on merging its violations bureau with neighboring South Orange.

New Jersey municipalities, meanwhile, are looking more and more like orphans with each passing day.

"The state is going to keep whatever they can," said Lawrence Pollex, interim administrator in Edison, New Jersey’s fifth-largest municipality. "They view the aid they share with other levels of government as discretionary."

To some segments of the public, anything other than police or fire is discretionary; to others, it’s not that simple. "One of the best ways to find out what’s discretionary is to cut something," Pollex said.

Do so, and hundreds of people can pack a public meeting. Just three days into his job, though, Pollex wouldn’t venture guesses about Edison’s budget-in-progress.

"You don’t want to cry wolf," he said. "We don’t want to go there until we know."

The Legislature tomorrow will consider a bill that would allow illegal immigrants who attend state colleges to pay in-state tuition rates. It faces tough odds, thanks mostly to resentment against illegal immigrants and concern over the state’s finances.

But this is a sensible bill that will pay dividends to all New Jerseyans. College graduates strengthen the economy and pay more in taxes. And this discount would be reserved for those illegals who are seeking citizenship, and attended at least three years of high school in New Jersey.

It adds no new net cost to the state budget because it offers no scholarships. It says only that these students will pay the same rates as the New Jersey kids they grew up with.

The frustration about illegal immigration is well-founded. But the way to enforce our laws is to protect the borders, and to insist that employers stop knowingly hiring illegal immigrants as cheap labor. Looking ahead, we also need a reasonable path towards citizenship for those who are already here.

But education is not the place to draw the line. We already pay to educate illegal immigrants in the K-12 system. It makes little sense to apply a different standard when they reach college age, just when they are learning skills that can strengthen the state’s economy.

If this legislation passes, New Jersey will join 10 other states, including New York, that allow illegal immigrants to pay in-state tuition.

This is not charity. This is in our interests. We need more college graduates, and this bill will help us get them.


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