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"That projection included $511 million in new state aid for school districts, but the administration source said Corzine's budget will include only a small portion of that -- the source was unable to give the exact figure -- and it will go exclusively to the 31 "special needs" school districts, partly for preschool programs." Also, check out Herb Jackson's Record Column from July 2005 the end for 'a bit of history' that clarifies what in known as 'off budget' funding that precludes public discourse: the process, the whats and the hows.
From the ‘www.gscschools.org’ website 3-15-06
Corzine budget plan includes higher taxes
He is expected to meet cash crisis with $2 billion cut in spending, too
Wednesday, March 15, 2006
BY JOE DONOHUE AND JEFF WHELAN
Star-Ledger Staff
Gov. Jon Corzine is planning more than $2 billion in spending cuts, along with major tax increases that could include an additional penny to the sales tax, to balance the next state budget, a top administration official said yesterday.
The cuts include $100 million from higher education and a freeze on state aid for most school districts. That would increase the pressure on municipal officials to raise property taxes and on colleges to raise tuitions.
"You are going to hear the howling near and far," said the official, who is familiar with the budget planning and discussed it on condition of anonymity.
The official said Corzine has not settled on the mix of tax increases but that they will generate less than $2 billion. The source said it is "likely but not definite" they will include sales tax changes.
Four other Democratic sources said the governor, who personally briefed Democratic leaders on the budget Monday, is considering raising the 6 percent sales tax to 7 percent and extending it to some untaxed services. Those two moves alone could net about $1.4 billion.
During a speech in
Administration officials have estimated the state would spend $4.5 billion more than it brings in during the fiscal year beginning July 1 if spending and revenue continue on their current track.
That projection included $511 million in new state aid for school districts, but the administration source said Corzine's budget will include only a small portion of that -- the source was unable to give the exact figure -- and it will go exclusively to the 31 "special needs" school districts, partly for preschool programs.
Last year, higher education received $2.1 billion, a $156 million increase. This year, colleges and universities will have to rely on tuition increases, surpluses and cuts to make up for a reduction that will exceed $100 million, the official said.
As he readies Tuesday's budget address, the governor also hopes to save about $200 million through layoffs and other personnel actions involving 15,000 non-unionized state workers, the source said. Those moves would include layoffs of about 400 political appointees; salary freezes; a requirement that non-union workers contribute 10 percent of their health insurance premiums (there currently are no co-pays), and possibly some pension changes.
The governor has ruled out similar steps for unionized workers, at least until salary contracts are up for renegotiation next year.
The governor, who held four public meetings on the budget last week, said yesterday the administration will launch an aggressive campaign to win support for his plan.
Richard Codey, as governor last year, considered and rejected raising the sales tax and extending it to services such as video downloads, membership fees for country clubs and installation of flooring and carpeting.
While those ideas are back on the table, another option Corzine is considering is a "surtax," or surcharge on income tax.
"It's pick your poison," said one Democrat aware of the governor's plans.
While Corzine said most options remain under consideration, the Democratic sources said he has abandoned any notion of imposing a New Mexico-style gross receipts tax on services provided by professionals like lawyers, doctors, and engineers. The administration also no longer is considering an extension of the sales tax to those same services.
Such a move would have drawn fierce opposition from the 15,000-member New Jersey State Bar Association. "If in fact that was in the budget, or that became part of the legislation, we absolutely would have gone to war," association president Stuart Hoberman said.
An income tax surtax, Hughes said, might be a bad move just two years after the state raised the income tax on the 35,000 taxpayers earning more than $500,000.
Hughes said the sales tax option "may turn out to be the most palatable one." Democratic sources said recent polling has borne that out.
Even at 7 percent, the sales tax would be lower than that in nearby counties of
However, Tom Wilson, chairman of the Republican State Committee, said, "Any additional tax increases are likely to put us over the edge and into a long-term economic death spiral."
Assemblyman Louis Greenwald (D-Camden), chairman of the Assembly Budget Committee, said the governor's plan will undergo many changes before its final adoption in June. "There are lots of rumors out there right now, so let's wait and see what is presented March 21," Greenwald said.
Staff writer Josh Margolin contributed to this report. Joe Donohue and Jeff Whelan cover state government and politics. Donohue may be reached at jdonohue@starledger.com or (609) 989-0208. Whelan may be reached at jwhelan@starledger.com or (609) 989-0379.
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Learning the painful lessons on pensions
Wednesday, March 15, 2006
Ronald Larkin is a former school superintendent in
His pension is $123,000 a year, a generous sum that was inflated by Larkin's scheming and the collusion of the local school board.
"I'm not saying I took the high road," Larkin said from his townhouse in Port St. Lucie. "But this was all reviewed and approved."
True enough. Larkin used all the familiar tricks to pad his pension, and they are perfectly legal.
The idea is to inflate the final salary, which sets pension benefits for life. So Larkin converted fringe benefits to cash. He won big bonuses and raises near the end. He was reimbursed for earlier pension payments. And so on.
It worked like a charm.
"I play golf and tennis and bridge, mostly -- just what I said I'd do when I retired," Larkin says.
If this makes you want to scream, hold on. There may be hope after all.
The big unions representing state workers and teachers now say they are fed up, too. They are planning to push for reform this year.
"Our members don't have the ability to manipulate the system and jack up their salaries at the end of their careers," says Bob Master, regional political director of the Communications Workers of America. "This is a problem that jeopardizes our members' pensions and discredits the whole system."
The all-powerful teachers union is striking the same note.
"This could absolutely not happen with a classroom teacher," says Joyce Powell, president of the New Jersey Education Association. "We want these abuses to be cleaned up. We'll have to study it and figure out ways to do it."
If they mean it, this could be big.
Because these unions scare politicians in
But do the unions really mean it?
It's hard to tell. They are opposed to big changes, like switching to a 401(k) system. And they promise to fight some reasonable reforms that would save big bucks, like moving the retirement age from 55 to 60.
Still, the average public pension in
The unions are starting to realize that they'd better clean the system up if they want to avoid a political backlash. And at a time when the state is supposed to contribute $1.8billion to the ailing pension funds, they don't want a backlash.
They don't have a specific plan yet, but there are plenty of ways to attack the abuses without hurting the little guy.
The state could ban salary padding at the end of a career, as in Larkin's case. It could forbid politicians with two public jobs from taking two pensions. It could end the bogus practice of accumulating pension credits for serving on part-time boards.
Much as they protest, the unions did help create the pension deficit we now face by pushing the Legislature to fatten their benefits. It is entirely fitting that they should help with the clean-up.
Larkin, meanwhile, is wondering why he's the target of such criticism. He only did what everyone else does by negotiating the best package he could.
When he did finally retire, he gave $81,000 -- half of his accumulated sick time -- to a local scholarship fund.
"I don't understand," he says. "What I did was not illegal."
But maybe it should be. And if the unions help, it probably will be.
Tom Moran's column appears Wednesdays and Fridays. He may be reached at tmoran@starleger.com or (973) 392-1823.
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Corzine faces defining moment
Posted by the Asbury Park Press on 03/15/06
We're hoping reports that Gov. Corzine is considering raising an additional $1.5 billion in taxes to balance the state budget is a trial balloon, not an attempt to soften the blow for a decision that has already been made. We will find out when Corzine unveils his 2006-07 budget proposal next week.
Gannett State Bureau Staff Writer Jonathan Tamari reported Tuesday that Corzine and his advisers are considering raising the sales tax from 6 percent to 7 percent, expanding the sales tax to include more goods and services, and placing a surcharge on existing income taxes.
Corzine has repeatedly promised he would raise taxes only if the budget couldn't be balanced with spending cuts. If he and his advisers are contemplating $1.5 billion in tax increases, it's obvious they aren't trying hard enough to find ways to reduce spending. As previous state Treasurer John McCormac often stated,
If Corzine does include tax increases in his budget proposal, it will be for one reason: lack of courage. The steps needed to bring spending under control are obvious — reining in the lavish benefits of the public employee unions, imposing deep staffing and payroll cuts in state government, dramatically reducing aid to the Abbott school districts and taking steps to halt spending abuses and inefficiencies in the schools and in local and county government.
Virtually every day, the Press generates stories about how taxpayer money is being squandered by local, county or state public officials. Alongside Tuesday's lead story about Corzine contemplating tax hikes was an article on how the pay of school superintendents is inflated by a variety of contract sweeteners that end up costing state taxpayers millions of dollars a year. No matter where you look, waste, spending abuse and outright fraud are to be found.
We will soon find out whether Corzine is part of the solution or part of the problem.
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Lawmakers warned on pension funding
Tuesday, March 14, 2006
By TOM HESTER Sr.
Newhouse News Service
The former chairman of a special task force that examined the funding crisis in
Philip D. Murphy, a retired Goldman, Sachs & Co. executive, told the Assembly Budget Committee the state needs to stop using gimmicks and borrowing to prop up the pension system.
"Pension costs have been a third-tier priority for the state for too long. It needs to be a top priority," said Murphy, who headed Gov. Richard Codey's now-defunct Pension and Benefits Review Task Force.
Gov. Jon Corzine is scheduled to unveil his state budget next week. He is attempting to close a $4.5 billion deficit. The budget must account for a $1.8 billion payment into the public retirement programs.
Murphy told the committee that legislators and governors from both parties, as well as politically connected public employees, are at fault for underfunding the pension system.
"The individuals who work for the state, the majority overwhelmingly put in an honest day's work for an honest day's pay," he said. "Nobody is getting rich off the back of the state except those who abuse the system."
Murphy called for an end to pension padding tactics such as end-of-career salary hikes and counting minor public positions toward pension eligibility. He said basing a pension on the average of an individual's five highest salaries, rather than the highest three as done now, would save the state $45 million to $260 million.
He said public employees should earn at least $5,000 annually instead of the current $1,500 to qualify for a pension, a move the Task Force maintained would save $3.7 million. He also said having current and retired public employees pay 5 percent of health-care costs would save the state $350 million.
Assemblyman Louis D. Greenwald, D-Voorhees, the Budget Committee chairman, said any legislation to confront the pension problems will be created with input from Corzine and state employee unions.
"It is going to happen during the budget process but we do not want to rush into anything," Greenwald said. "We want to make sure we get it right."
Carla Katz, president of CWA Local 1034, the largest state employee union, said she opposes basing a pension on five years of highest pay instead of three years, but does want to see the practice of pension boosting ended.
"There is definite interest in crafting legislation to eliminate the abuses and bring integrity to the system," she said.
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Corzine looks at 7% sales tax
Wednesday, March 15, 2006
Governor Corzine may push the state sales tax from 6 to 7 percent as part of a massive package of tax increases to balance the state budget, according to legislators briefed on the plan.
The sales tax hike could raise a badly needed $1.1 billion for the state Treasury but set off a political firestorm hotter than
Corzine is looking to go one step further than Florio and include possible increases in the income tax, according to three legislators and two staff members familiar with the budget proposals.
Lawmakers who were briefed on Corzine's plan cautioned the exact details were far from final, but stressed that tax increases would likely be a part of the budget the former Goldman Sachs chairman presents next week.
The Governor's Office declined to comment on the tax plan.
"We have no new announcements at this time," Corzine spokesman Anthony Coley said. The governor and his staff are still preparing key details of the budget.
The first-term governor must come up with a combination of tax increases, budget cuts or both to close a $3.5 billion budget gap. Corzine has promised that his spending proposal will include steep cuts to state programs and services.
Lawmakers and aides who met with Corzine this week said the administration hopes to raise a total of $1.5 billion from higher sales taxes. The state would collect $1.1 billion by charging the higher rate. Most of the remainder would come from expanding the tax to dozens of consumer goods that are now exempt.
Details on what new items would be included have not yet been settled. But the lawmakers said there is not likely to be new taxes on food and clothing -- an option that had been recommended by members of Corzine's transition team.
A Corzine income tax hike could come in the form of a surcharge for affluent taxpayers, the sources said, but it was unclear exactly who would pay and how much would be charged. Legislative aides also said the Corzine staff has discussed eliminating some deductions for wealthier residents.
Republican lawmakers were quick to challenge Corzine on any plan to raise taxes.
Assembly GOP leader Alex DeCroce said Corzine should be talking about budget cuts before any tax increases.
"It is troubling that before we have had any real discussion of possible spending cuts the governor appears to have made a decision to increase taxes. It is equally troubling that this tax hike proposal is being floated while the administration is still considering big ticket spending programs like stem-cell research," DeCroce said.
Any increase could be financial doom for many families and business, he said.
"Taxpayers who are already stretched to their limit by our highest-in-the-nation property taxes may be forced to pick up and leave the state," DeCroce said.
Whatever Corzine proposes, it must clear the Assembly and the Senate. What finally gets approved rarely looks like the budget originally proposed by the governor. The budget message is the start of months of hearings, back room deals and late-night negotiations.
To balance his first state budget, Corzine must surmount a structural deficit once estimated at nearly $5 billion but now considerably smaller.
A growing economy has brought in more tax revenue, mostly in income taxes from individuals and corporations, than officials counted on when they passed the current $27.9 billion budget in June. Corzine must sign a balanced budget by July 1.
Compounding Corzine's financial pressure is his promise to increase property tax rebates, raising the program by 10 percent over what it was in 2004 before it was cut to balance the 2005 state budget.
Coley declined to say how the rebates figured into the budget talks.
"We're not ready to go there. We have nothing new to announce at this time," he said.
People making purchases in
While
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Less state aid equals more tax
Wednesday, March 15, 2006
Proposed public school budgets submitted to the
Many area district officials find themselves walking a fine budget line that could become even thinner if state aid does not meet projections. Nevertheless, homeowners will see higher property tax assessments.
"We believe it's going to go down," Jeanette Makus,business administrator for the
Earlier this month, Gov. Jon S. Corzine put a damper on local school district officials' hopes for more state aid when he reportedly told a group of more than 100 school officials that he would try to maintain the $9.5 billion the state contributes to public schools, despite the $4.6 billion budget shortfall.
That translates into household increases for the
In Little Falls, Board of Education secretary Warren Ceurvels said he expects state money to remain flat or even decrease because of the state's tenuous fiscal condition.
"We've been at the same level of state aid for the last four years," he said Monday.
The $11.4 million budget the school board unanimously passed Monday night represented a 3.3 percent increase from last year's budget of $11.1 million that included $727,908 in expected state money. The school district plans to support the budget with a $ 9.9 million tax levy, up 7.6 percent from last year's levy of $9.2 million.
Homeowners assessed at the township average of $147,000 would pay about an added$135 next year if voters approve the budget on April 18 during the school board election.
Meanwhile, the
John DiPalo, the school district's business administrator, said if the state didn't meet funding projections, it could mean the district's tax levy would increase more than the 8 percent jump that is currently in the proposed budget.
The spending plan now calls for property owners to pay an additional $174,607 in the local levy, which means an additional $131.63 annually for a home at the borough's average assessment of $146,000.
Meanwhile, Pequannock school district officials said voters will face a two-part tax increase on April's ballot to finance the kind of 2006-07 school system parents have publicly called for -- with services including upgraded technology and top-of-the-line athletics.
If the proposed property tax levy is approved for 2006-07 $30.5-million operating budget, plus an extra tax for added items, it would mean an additional $230 in property taxes for an owner of a home assessed at $468,700.
School officials have had to split the tax because of state limits on increases in tax-supported spending. Voters will see a $26.65 million proposal to finance the bulk of the budget. A second proposal will seek $622,844 more to pay for items that can't be squeezed into the regular spending plan because of state limits. The state allows such secondary referendums, with the specific costs listed.
In this case, school officials have separated out major hi-tech, music, nursing, and sports program costs into the second tax request.
District officials expect to learn what fiscal realities they are facing when state aid figures are released on March 23 – two days after Corzine delivers his recommended state budget.
Reach Paul Brubaker at (973) 569-7155 or brubaker @northjersey.com, and Jennifer Cunningham at (973) 569-7162 or cunningham@northjersey.com.
E-m/ail: mcalpin@northjersey.com
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For school officials, perks pay (from the NJ School Administrators website)
Top school administrators throughout the state routinely get perks and bonuses that give them thousands of dollars beyond their published salaries and ultimately cost taxpayers millions of dollars, according to a State Commission of Investigation, or SCI, report released Monday.
The problem is not school officials, but the system, which the report said is “riddled with inconsistencies and freighted with pressures that render it vulnerable to abuse.” It calls for more state oversight by both the state Department of Education and the N.J. Division of Pensions.
“This is not a report about individuals,” SCI spokesman Lee Seglem said. “It's a report about a system. We are not condemning people for making a decent living doing a hard job.”
Press of
March 14, 2006
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A BIT OF HISTORY: THE RECORD COLUMN BELOW FROM JULY 2005 ABOUT TRENTON’S ‘OFF BUDGET’’ OR ‘BELOW THE LINE’ AGREEMENTS FOR SPENDING FOR FY06 DEMONSTRATES WHY THERE IS NO PUBLIC DISCUSSION OVER SOME SPENDING THAT GETS FOLDED INTO THE BASELINE BUDGET FOR THE SUBSEQUENT YEAR (FY07 IN THIS CASE). IN THE CASE OF SCHOOL AID, THE ADDITIONAL FUNDS WERE GIVEN TO CERTAIN DISTRICTS VIA A “JBOC” TRANSFER ( JOINT BUDGET OVERSIGHT COMMITTEE) IN THE WINTER OF 2006. THIS METHOD OF GETTING ADDITIONAL AID TO ABBOTT DISTRICTS – among other state programs - HAS BEEN AN ON-GOING PRACTICE IN TRENTON IN RECENT YEARS.
Budget 'cuts' more a case of creative math
Monday, July 18, 2005
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Warning: Numbers ahead.
And not just regular numbers. They're
The budget that acting Governor Codey signed July 2 calls for spending $27.9 billion for the fiscal year that runs through next June. That's about $100 million less than the budget then-Gov. James E. McGreevey signed a year ago.
But if you think Codey and the Democratic-led Legislature cut spending, you don't know state government. They may have cut the budget, but they didn't cut spending.
Here's how.
First of all, the Legislature approved a bill July 2 to increase Homestead Rebates by $400 million. But the bill specified that it was a supplemental appropriation for Fiscal Year 2005, which ended on June 30, or two days before Codey signed it.
Now, Treasurer John McCormac's talented, but he has not mastered time travel. If he had, he'd have done something about the final four games of the 2004 American League Championship Series by now, and the Curse of the Bambino would still live.
A lower bottom line
But I digress. Because there's no way for the Treasury Department to go back in time and send out the rebates in a fiscal year that ended two days before the money was appropriated, the $400 million was "carried forward" into this fiscal year, and it will be spent on rebates that go out this summer.
That is exactly how the Democrats wanted it spent in the first place, by the way. So why designate the $400 million as an FY05 appropriation, you might wonder?
Two reasons: Unanticipated revenue collected in FY05 made it possible to do it. And if they didn't do it, they would have had to carry that unanticipated revenue forward into the budget and then count the rebate's cost against the FY06 bottom line, which then would have been higher than the bottom line of the bill McGreevey signed last year, so no one could claim to have cut the budget.
Also, since Codey proposed the budget in March, state Education Commissioner William Librera has approved about $150 million more for supplemental programs in Abbott districts, the mostly urban school districts covered by a series of Supreme Court rulings. That money, which districts have been told to expect in their budgets, was never budgeted by the administration or appropriated by the Legislature.
Presumably, there will have to be another bill to cover those costs, or a special legislative committee will have to approve a transfer to the Education Department. Where the money will come from will be interesting to watch, but one thing's for sure: That $150 million is not in the $27.9 billion bottom line.
'Off-budget'
Last, the final budget agreement called for providing an extra $100 million for "charity care," the program that funds hospital bills for people with no insurance. But you won't find that $100 million, or the more than $500 million Codey originally proposed spending on charity care, in the $27.9 billion budget either. That's because almost the entire program is "off-budget," along with nearly $13 billion in other spending the state will make this year.
Why is all this money off-budget? Because the Legislature and the governor say so.
Off-budget spending generally falls into one of three categories: federally funded programs; revolving funds, where money that comes in is paid back out for the same purpose; and programs with dedicated revenues such as charity care, which is funded by a portion of cigarette taxes, a diversion of payroll taxes originally imposed for unemployment insurance, assessments on HMOs and emergency clinics and several smaller levies, including a tax on cosmetic surgery.
An old trick
Could these programs all be included in the budget? Sure they could, but that would make the bottom line on spending shoot up even higher, and no governor wants to say he increased spending by 46 percent just to make the budget honest.
It should be noted that Codey and the Democrats did not invent the practice of putting programs off-budget; it has gone on for decades. But they're certainly not showing any eagerness to stop it.
So what does this all mean?
I'll concede that it does not mean much to people's daily lives. As long as the check clears, you don't really care which fiscal year's budget included the money for your rebate. If you have to go to the hospital and don't have insurance, you don't care if the program that pays your bill is on-budget or off-budget.
If you have a child in an Abbott district, all you care about is whether the after-school or tutoring program that Librera told your district it could offer is offered, not how the bureaucracy authorizes the expenditure.
But when the bottom line in the budget is not really the bottom line, it makes it that much harder to believe anything the government says.
E-mail: jackson@northjersey.com
