Putting off today…

State’s new budget perfect for an election year

By: Hank Kalet
   The best thing that can be said about the state’s new budget is that the government didn’t close its doors.
   Unlike last year, when the state became the poster child for failed policies and political bickering, this year’s budget negotiations were a breeze, resulting in a budget that offered property-tax credits, cut state taxes for low-income taxpayers and New Jersey businesses and boosted aid to schools and municipalities.
   It is, in a nutshell, a perfect election-year spending plan, giving incumbents — especially Democrats — a chance to tout their tax-reform credentials at a time when all 120 seats in the state Legislature will be on the ballot.
   It also is the complete antithesis of the 2006-2007 budget, which resulted in a shutdown of state government but put in motion the Legislature’s first real attempt to address a decade of fiscal shenanigans that has left the state in its current fiscal crisis.
   And when I say antithesis, I mean it on many levels. Obviously, the budget was completed well ahead of the July 1 deadline without threats and without the shuttering of state offices or the closing of casinos and beaches. That, in and of itself, sets it apart from last year’s debacle.
   At the same time, however, this year’s budget is nothing more than a stop-gap, pushing off many of the hard decisions until after the 2007 election, in particular the governor’s controversial "asset monetization" plan. The governor is hoping to generate enough of a windfall — either by leasing some state assets to private firms or by borrowing against expected toll or other revenue — to pay down the state’s debt and make money available for other needs.
   The asset plan, however, is rather risky and it is politically unpopular. Republicans are making monetization — in particular, the potential leasing of the N.J. Turnpike and Garden State Parkway — a main plank in their election campaigns this year, while many Democrats have already come out against it.
   But come November, it should officially make its way into the public discourse, as should several other major issues that need to be addressed if the state is to fix its broken finances
   The state, for instance, must create a new school funding formula. The current state formula has managed only to make a bad situation worse, pitting urban and suburban districts against each other in a chase for what has been a limited pot of state money.
   Drafting a new funding formula will not be easy and will require legislators and the governor to think outside the box. It would be wrong of the state to cut funding to urban schools, where improvements have come slowly, to come up with the needed funding boost for suburban schools.
   Rather than redistribute what already is an inadequate pot of cash, the state needs to expand the pot drastically, increasing its income tax and paying a greater proportion of education costs in New Jersey than the approximately 40 percent it kicks in now.
   That will require not only new state taxes, but regionalization and consolidation at the local level to reduce costs.
   Making everything more difficult is the status of the state’s pension system, which has a state-reported deficit of more than $18 billion — a figure that some experts say vastly underestimates the hole the state has dug for itself over the years.
   The $1.3 billion in pension funding included in the 2007-2008 spending plan is a modest down-payment against the deficit — and brings to $2.4 billion the amount paid into the fund by the Corzine administration over the last two years (more than twice the amount paid in over the previous 10 years combined).
   That, of course, is nowhere near enough to correct the problem — the state treasurer’s office has said that annual payments could rise to $3.3 billion over the next five years without taking into account the amount needed to pay down the shortfall.
   None of these will be easy problems to solve. There will be plenty of pain to go around in the form of higher state taxes and a change in the way some services are provided. But we have no choice if we are to get the state back on solid fiscal footing, improve the state’s schools and reduce our reliance on property taxes.
Hank Kalet is managing editor of the South Brunswick Post and The Cranbury Press. His e-mail is [email protected] and his blog, Channel Surfing, can be found at www.kaletblog.com.