Guest Viewpoint
By Jon Shure
Imagine your doctor saying you’re very sick. You need big changes in the way you live and serious medical procedures or you might not make it.
After hearing some potential courses of treatment outlined, you absorb the news and say, “OK doc, what’s next?”
And your physician replies, “I’ll get back to you.”
Governor Corzine’s budget address was a little like that.
He painted a grim, accurate picture of the state’s finances: New Jersey has been living beyond its means for more than a decade. (for all the details on how it got this way, check out our report Take the Money and Run -- written in 2001, it predicted all the bad stuff that’s happened since.)
And he showed compassion -- a nice bedside manner -- making it clear the state should be doing a lot more to help people in need. That is a welcome contrast from the way they’ve been doing business in Washington, where we hear government is the problem rather than the solution and we’re supposed to think cutting taxes for the rich helps the rest of us.
I think Tom Moran’s recent Star-Ledger column was on the mark in saying there were some things in the budget that show what kind of governor Corzine would be if the state had some money to spend. He is, after all a self-described liberal.
And there were some good things in the budget proposal, like Corzine’s decision to right the wrong perpetuated on working families when the state initiated an Earned Income Tax Credit in 2000. The federal government and 19 states have EITCs, but only New Jersey cuts off eligibility when a family’s income reaches $20,000. That was shameful and it was getting to the point where some people were ineligible for the state EITC though their income fell below the federal poverty line.
Strengthening New Jersey’s EITC to match the federal program means nearly 300,000 more households get state benefits. The EITC often is described as a powerful anti-poverty tool. It is that -- but a better, more inclusive way to look at it is as a powerful economic development tool. The $64 million it costs to expand the state program won’t go into Cayman Islands bank accounts, but right back into the state’s economy -- spent on necessities, generating sales tax revenue and helping people move up the economic ladder.
Increases in aid to school districts, municipalities and colleges have the recipients smiling -- not because the money is a lot or enough, but because it’s better than the cuts or flat-funding of recent years. Where I live -- Ewing Township -- state aid is going up by $750,000, thank you very much.
There were some not-so good things, too. Letting the Alterative Minimum corporate tax expire could mean that some of the state’s most profitable businesses go back to paying around $500 a year to the state. And while Corzine’s call for greater accountability and transparency in the budget process was on target, he didn’t propose that the state disclose each year how much revenue it loses through various tax breaks. Corzine praised commitments by Campbell’s Soup, Bayer, Unilever, Citgroup and Verizon to expand in New Jersey. How much are taxpayers giving them in return? A tax expenditure budget would make it easy to find out.
But as Corzine himself emphasized, the big news about the budget was what wasn’t in the budget. A lot that needs doing isn’t funded this year. Steps needed for stabilizing state finances aren’t being suggested. In fairness, Corzine has a tough task because this budget has to try to do two things.
One is to continue digging out from under the blizzard of bad decisions dating back to the 1990s -- like big income tax cuts, raiding pension funds and dramatically increased borrowing.
The other task is to produce a budget that invests in New Jersey’s future. There isn’t enough money to do both, let alone do all that’s needed on one or the other.
Still, it’s appropriate to ask why the governor, given that he was so forthright about the mess we’re in, offered no prescriptions. Why are we choosing, as he put it to be “in the eye of the hurricane?”
One reason surely is the calendar. This is an election year for the state legislature. Its members likely are in no mood to tackle big, expensive, politically dangerous solutions. Did you ever see the BBC-TV series Yes Minister? Rent it if you can; it was hilarious. The comic tension in the show was between an ambitious British cabinet minister and his department’s number two man, a career civil servant who didn’t want the boat rocked. Whenever the minister proposed something bold and innovative, the other guy would get him to change his mind by saying, “That would be very courageous.” The minister knew “courageous” was a euphemism for political suicide.
Well, pressing harder would be courageous on the governor’s part. And that shouldn’t be too much to ask for. On the other hand, asking people to do what you can’t get them to do can be bad politics that reduces the chances of victories later on.
Another reason, and Corzine pretty much said so, is that he thinks a big part of the answer for New Jersey is to sell off or in some other ways get money from state assets like the Turnpike and the Lottery -- but that he isn’t yet ready to make the case. It will be a hard case to make and it should be.
“Asset monetization,” as it's called, would produce big bucks up front, but it raises serious questions about government meeting its responsibilities and about dumping huge financial problems on the state half a century from now. You know, the Turnpike wasn’t built on spec to see if a bidder came along. It was built to move people and goods -- a legitimate government function. It isn’t overly panicky to worry that if roads are sold, what’s next? Libraries?
The governor sounded dismissive of tax increases, though some -- as part of a comprehensive, overdue restructuring of how New Jersey raises state and local revenues -- would make sense. That discussion needs to happen and he should be involved. The 20 percent property tax relief passed by the legisature is hardly tax reform. The whole system needs to be put on the table and made fairer through relying more on broad-based state taxes.
For now, though, it’s clear that New Jersey is in for a calmer budget season than the past few. We’re taking a breath, if you will. And it’s premature to say this will make things better or worse in the long run. The only way to judge this year’s budget will be by what comes next.
Jon Shure is president of New Jersey Policy Perspective, a nonprofit organization in Trenton that conducts research on state issues.
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