How To Cut New Jersey's Budget By $858.52 Million

The following proposals would reduce Governor Corzine’s $30.9 billion budget for fiscal year 2007 by $858.52 million. It should be noted that our recommendations preserve the Governor’s proposals for:

$1.1 billion increase to the state worker pension fund
$529.80 million in additional spending for the property tax rebate
$1.6 billion ‘saved’ then redirected to other spending initiatives
$111.68 million in other additional spending

Our proposals cut not one dime from current state services or programs and not one head was cut from the state’s 152,700 person workforce to achieve our proposed budget reductions.

Government worker salaries and benefits, a major factor in the state’s fiscal crisis, are not addressed by our recommendations nor have we wandered into the Abbott school funding issue. All of these issues must be addressed if New Jersey is to get serious about reducing state spending and providing significant property tax relief.

Instead we chose to concentrate on cutting low hanging fruit and on those areas most likely to achieve consensus. Elimination of the state’s $152 million BEIP, a business rebate program, would have pushed our recommended reductions to over $1 billion dollars, but we have elected not to include it with this set of recommendations to avoid the criticism we had to cut funding for existing state programs or services to achieve savings.

$411.87 million – Cut the $411.87 million increase in spending from the Grants-in-Aid line item Other. The state currently spends $795.483 million on Other Grants-in-Aid and we believe the request for a 51.78% increase is unreasonable. Even with our proposed cut, the total Grants-in-Aid category would still cost taxpayers over $8.15 billion.

$149.2 million – Reject the tax increase of 35 cents per cigarette pack – The Governor’s budget indicates revenue from the cigarette tax would decline by $149.2 million, from $640 million to $490.8 million should this tax increase be enacted. State revenue from the cigarette tax was $612.2 million in fiscal year 2004, $626 million in 2005 and the estimate for 2006 (recently revised upwards) is $640 million.

$108.4 million - Eliminate Special and Extraordinary Municipal Aid fund pool - If an unusual financial circumstance, event or catastrophe should befall a municipality, tap into the state’s budgeted $600 million surplus to provide assistance. The surplus is comprised of a $300 million rainy day fund and a $300 million unrestricted fund. Even with our proposed cut, the total Municipal Aid category would still cost taxpayers more than $1.73 billion.

Note: Extraordinary Municipal Aid, (N.J.S.A. 52:27D-118.35 et seq.), provides additional state aid to address a municipality's extraordinary need because of severe fiscal crisis outside of the municipality’s control. This aid may not be “built” into a municipality’s budget and is provided as a “one-time” grant. This change in funding source should help to return the granting of Special and Extraordinary Municipal Aid back to the original intent of the law – a “one-time” grant to alleviate a fiscal crisis not caused by a municipality's planned overspending and under taxing.

$105 million - Reject the Governor’s proposed income tax cut which would reduce state revenue and funds available for property tax relief by $105 million.

$63.25 million – Cut the following spending increases from Direct State Services –$12,885,000 from line item Materials and Supplies; $7,479,000 from line item Services Other Than Personal; and $42,841,000 from line item Other. The state currently spends $1.35 billion on just these three line items in the Direct State Services category.

$20.8 million – Cut the $20.8 million spending increase from the State Aid line item Other. The state currently spends $17.252 million on this catch-all line item and we believe the request for a 220% increase is unreasonable. Even with our proposed cut, the total State-Aid category would still cost taxpayers over $2.18 billion.

Budget Calculations

NJ Budget 2007 Revised
$28.3 billion – NJ Budget 2006 (Includes $1.6 billion ‘saved’ then redirected to other spending initiatives in FY 2007 budget)
+1.1 billion - State worker pension fund payment
+$529.80 million - Property tax rebate
+$111.68 million - Additional spending
Total - $30.04 billion – NJ Budget 2007 Revised

NJ Budget 2007 - Governor Corzine
$30.04 billion – NJ Budget 2007 Revised
+ $858.52 million – Proposed Budget Reductions
Total - $30.9 billion – Corzine’s NJ Budget 2007