"Knowledge will forever govern ignorance

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Monday, February 06, 2006

Taxing and Spending New Jersey Into Debt

The Star-Ledger has an article today about New Jersey’s fiscal crisis - Bill comes due for years of fiscal irresponsibility – that sums up what conservatives have been saying for years. The state’s politicians have taxed and spent New Jersey into the ground, while almost all other states are booming.

Despite recurring deficits, the state budget grew about $5 billion the past four years.

What's worse, states like Florida, Massachusetts and New York are talking about cutting taxes even as New Jerseyans digest the fact that their taxes have been raised more per capita than any state's the past five years.
Economists and budget-watchers note the Garden State has a problem mirrored only by a few others - those ravaged by hurricanes or mass layoffs in the auto industry.

At least Mississippi and Louisiana have an excuse. They got clobbered by Hurricane Katrina. Michigan has chronic budget problems. But it has lost more than 300,000 jobs in the auto industry in the past few years.
The country as a whole has experienced growing prosperity and most state coffers are swelling with surpluses. That’s not the case in New Jersey despite “nearly $4 billion in tax increases enacted since 2002”.

In New Jersey, it didn't require a natural disaster to create the $5 billion-and-counting budget gap. Politicians produced it all by themselves.
New Jersey’s budget has increased from $22.5 billion in 2002 to $28.1 billion in 2005 – a 25% increase in state spending in just four years. As Governor Corzine repeated again Thursday night before the New Jersey Chamber of Commerce in Washington: "Our state is pretty much broke." The state now faces a budget gap for next year estimated to be in excess of $5 billion.

Over the past five years, taxes rose $434 per capita, far more than any other state. At the same time, the state went on a spending spree financed in part by deficit borrowing now banned by the state Supreme Court.
As we have previously pointed out, Georgia has a population slightly larger than New Jersey’s, but has a state budget that is 60 percent less. That’s a huge difference in spending, even through Georgia is geographically much larger and provides 60% of the necessary funding for its public schools. The reverse is true for New Jersey, where 60% of the total tab for schools is funded through property taxes.

For a comparison closer to home, look at the difference between Pennsylvania and New Jersey. Pennsylvania is a much larger state and has a population about 43% greater than New Jersey’s, and yet has a state budget that is about 20 percent less than ours.

New Jersey's budget is now $4.5 billion bigger than Pennsylvania's, even though that state is much larger and has 3.7 million more people.
New Jersey has enacted huge tax increases since 2002, while the politicians in Trenton have “spent like drunken sailors.” Property taxes have continued soaring to keep up with the rising cost of public schools. Meanwhile, the percent of state property tax relief, to all but the Abbott school districts, has continued to slide.

The budget adopted last July totaled $28.3 billion. Corzine's transition team estimates that a combination of soaring expenses and declining revenues could create a gap as wide as $5.5 billion if nothing is done to address it.
The Democrats in Trenton have slapped the people of New Jersey with $4 billion more in taxes and yet the state is facing declining revenues. Gee, how’d that happen? The answer is quite simple. You can’t tax a state into prosperity and high tax burdens actually drive taxpayers, investment and businesses out of the state. When something is taxed you get less of it, whether it’s income, smoking, investment or imports.

Dan Clifton, a budget analyst with Americans for Tax Reform believes the nearly $4 billion in tax increases enacted since 2002 is one reason for the state's malaise. "There was no cutting," Clifton said. "It all was smoke and mirrors."
Former state Treasurer Clifford Goldman, a Corzine transition team adviser said: "We have dug our own hole." A huge hole to be more precise, one that has been exacerbated by promising unsustainable benefits to state workers and teachers.

Former Acting Governor and now Senate President Dick Codey said “Corzine can't eliminate the budget woes in one year. He questions whether the state can make the full $1.7 billion pension payment Corzine promised during the campaign.”

"We've got to start addressing the structural deficit, no ifs, ands and buts about it," Codey said. "I don't expect, and I don't expect the governor does, that we can fix it all in one year."

Codey believes the actual deficit is in the $3.7 billion range -- if Corzine doesn't make such a big pension payment and foregoes his campaign promise to boost property tax rebates by $550 million.
So what’s to be done about the state’s financial mess beyond breaking campaign promises? Well, as you might expect the usual liberal response is to raise taxes. While other states were counting their surpluses, New Jersey was raising taxes and counting its deficit. While other states held the line on spending, New Jersey couldn’t spend taxpayer money fast enough to suit the usual special interests.

Jon Shure, president of New Jersey Policy Perspective, a liberal think tank, traces some of the budget problems to the sales and income tax cuts of the 1990s. He said by one estimate, those tax reductions cost New Jersey coffers about $15 billion over a dozen years.
That’s right, according to the “progressive” way of thinking, budget problems arise because taxes aren’t high enough. The Jon Shures of New Jersey never notice that states like Georgia and Pennsylvania live quite nicely with far less state spending.

It never dawns on “progressives” that it is spending that causes deficits and that New Jersey spends too much. No, according to folks like Jon Shure, it’s the fault of the hard working people of the state for not giving up more of their income to taxes. The liberal crowd hasn’t taken stock of the fact that New Jersey has enacted huge taxes increases since 2002 and still we find ourselves with a mammoth state budget deficit.

"Not only is our economy lagging, but we squandered prosperity when we had it and we're paying the price for that," Shure said. He believes the state should expand the sales tax to items that weren't available a few decades ago, such as use of the Internet.
New Jersey’s economy may be lagging, but it is not because the people of New Jersey haven’t been taxed enough. Rather it is precisely because the state has taxed and spent too much. Our prosperity has been squandered alright, by the politicians in Trenton.

Governor Corzine will deliver his budget address on March 21, any bets on who will be called upon to ‘sacrifice’?


At 4:53 PM, Blogger njgalaxie73 said...

If there is any good that could possibly come out of all of the state's budget problems it's the possibility that Corzine will have no choice but to govern like a conservative just like Bill Clinton did on welfare reform in 1995. A liberal WILL govern like a fiscal conservative if his back is against the wall and has at least half a brain and I don't doubt that he sees the handwriting on the wall.

At 5:37 PM, Blogger Ken Adams said...

NJ Galaxie is partially right here. A liberal will govern like a fiscal conservative, but only if his back has been put against the wall by a legislature in opposition to him.

At 6:53 PM, Blogger njgalaxie73 said...

Thanks for the assist on this one Ken.:-) I really do feel that if the Democrat controlled State Legislature is as self serving and willing to protect their power by any means as we both know they are, they would not hesitate to put on a show for the television cameras and voters and demand that Jon Corzine make fiscally conservative reforms. these people stop at nothing.

At 8:38 PM, Blogger Motocrossed said...

OK, let me educate a few of you here.

1. Christie Todd Whitman, while borrowing from the pension to pay for new programs in an expanded budget actually lowered the pension contribution for state workers.
2. James E. McGreevy again borrowed from this pension then raised the contributions back to the original level.
3. It is not only the state employee who draws from this pension, political hacks and their appointees also draw from this pension more often using gimmicks that minimize the time they spend contributing and maximizing the amount they take out, trust me I have seen it first hand. In addition if you are "politically" friendly, you can also get a deal that puts you in a higher pension bracket without actually contributing the total amount. In other words, you get back more then you put in on the backs of the rank and file.

It is so easy and convenient to talk about how the state would be in better fiscal shape if it did not have to pay those "large" pension payments. Those large pension payments would not be as large if the politicians didn't mess with it. Just remember years ago it was one of the best managed pensions in the USA.

At 11:37 PM, Blogger njgalaxie73 said...

Ummmm....Who's disagreeing with you?

At 8:59 AM, Anonymous Rafe said...

Thanks for your post, quite worthwhile material.
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