"Knowledge will forever govern ignorance

 and a people who mean to be their own governors

 must arm themselves with the power which knowledge gives."

Thursday, May 04, 2006

New Jersey’s Diminishing Returns

New Jersey state treasurer Bradley Abelow is now projecting the state will collect less income and corporate taxes than he originally estimated - for both this and the next fiscal year. As a result, he is also projecting the state’s budget deficit could grow to as much as $5 billion.

According to Treasury officials, collections of the Corporate Business Tax fell $150 million to $175 million short of budgeted projections while income tax revenue was down about $300 million to $10.5 billion.
Abelow warns that in light of the state’s revenue slump, he could not rule out cutting property tax rebates or reducing Governor Corzine’s proposed $1.3 billion contribution to the public employee pension system.

Abelow said the administration would first focus on finding more spending cuts before considering additional tax increases.
Reducing the state’s workforce or eliminating proposed spending increases on new or other programs were not mentioned as targets of possible cuts. Take this as a signal the meager increases Governor Corzine had proposed for property tax rebates are history. Get ready for the income tax surcharge.

Meanwhile, other states are seeing their coffers swell and federal tax revenues continue to soar to new record highs. The nation's strong economic growth is creating this tax revenue boom for most states, with the exception of hurricane ravaged states, and New Jersey.

Why are New Jersey’s income and corporate tax revenues down? Consider the effect the billions in new and increased taxes Trenton has enacted over the past few years and couple that with skyrocketing property taxes and you’ll have the answer. New Jersey has taxed businesses and residents to the point of diminishing returns.

But, the news gets worse. Abelow also announced that a new estimate shows the deficit for the state's public employee pension system is nearly $18 billion as compared to the $12 billion projection the state published just two months ago.

As the stock market climbs to a new 6-year high this news should raise a few eyebrows. Unless the state has done an incredibly poor job investing the state’s employee pension funds, the contribution deficit should be decreasing, not growing. The $18 billion figure may well be a more honest estimate of the shortfall, but consider a 50 percent increase in the estimate as a signal the $1.3 billion pension fund contribution will not be on the chopping block. Not that we believe it should be slashed. This debt must be paid sooner or later. There is no point in kicking the can further down the road.

The real problem we face is that Governor Corzine has been unwilling to address the programs and employment decisions that are driving the 9.2% spending increase in his proposed budget. He is further exacerbating the problem with calling for spending on new and expanded programs. We are all in it together; the question is how will the Governor plan to get us out.


At 8:38 AM, Blogger PN said...

The public employee pension deficit of $12 billion was a total fiction based on wildly optimistic assumptions. Abelow's figure of $18 billion is closer to the mark, but I still think it's too low.

It's also important to note that the pension deficit figure does not include the state's obligations for post-retirement medical benefits. This unfunded liability has been roughly estimated to be at least $20 billion, but I suspect the number will end up much higher as well. (New government accounting standards, which go into effect next year, will force NJ to calculate and publish a more accurate estimate.)

NJ Fiscal Folly

At 2:03 PM, Anonymous John said...

I guess everyone who was saying he's doing the hard, but right, thing was wrong. The deficit is going to grow again, business as usual.

At 2:07 PM, Blogger njgalaxie73 said...

It's a really sad state of affairs when New Jersey is lumped in a category with the hurricane ravaged states economically. Unfortunately it dosen't look like Hurricane Corzine will be letting up anytime soon.

New Jersey is an absolute wasteland as far as job growth is concerned which is why I ended up getting a job in Brooklyn. I think that more and more New Jersey residents who live in the New York and Philadelphia regions of the state will be taking jobs there. There are way more job opportunities that pay much better money and state income tax refunds are much better.

If Jon Corzine is recalled it wouldn't shock me one bit. He's already on a much faster track to disaster than McGreevey was when he first started.

Mind you, I don't neccesarily believe that recalling Corzine will do any good seeing as though Dick Codey will just step in and win by a landslide by tricking people into thinking he's some kind of hero like he did the last time. New Jersey voters have to be really tired of the way Democrats have run the state and every time I think they have finally reached their limit I'm proven wrong.

As much as I would like to see a Bret Schundler or a Steve Lonegan become governor and fix what is fundamentally wrong with the system I just don't see it happening as long as the Whitman Republicrats and elitest dinosaurs keep standing in the way of the real conservative politicians who can make substantive and long term reforms. I have the feeling I'll be moving out of the state before that ever happens.


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