PACKET EDITORIAL, Feb. 10
By: Packet Editorial
Let’s see if we’ve got this right:
Gov. James E. McGreevey spends most of his first two years in office complaining to anyone who will listen how the state treasury has been virtually bankrupted by the irresponsible fiscal policies of his predecessor, Christine Todd Whitman. Specifically, the Democratic governor is critical of the previous Republican administration for its excessive borrowing "living beyond its means" is the phrase we grow accustomed to hearing as it mortgaged the state’s future to meet its current spending needs.
This will not be allowed to happen in the McGreevey administration, the governor boldly declares. We will meet our financial commitments head-on. We will not borrow and spend as the Whitman administration did. We will pay as we go.
That was then.
This is now.
With the Transportation Trust Fund running out of money and with Gov. McGreevey, against the advice of his own blue-ribbon panel, having ruled out raising the state’s inordinately low gasoline tax to help replenish it his administration is now eyeing something called Garvey bonds, described as an innovative financing mechanism for transportation projects.
Here’s how they work: A state, county or municipality that wants to expand a highway, build a bridge or fix a tunnel but doesn’t have the cash to pay for it issues Garvey bonds, which are backed by the guarantee of future federal transportation funding. This raises the money necessary to proceed immediately with pressing transportation projects. Then, the federal funds that come in a few years later are used to pay off the bonds (plus the interest on the debt) that financed those pressing projects.
The McGreevey administration is reportedly planning to borrow up to $900 million next year using Garvey bonds, and promptly start spending the proceeds on projects all across New Jersey. This has labor leaders and contractors salivating and wouldn’t exactly harm the re-election prospects of legislators serving those districts that are reaping the benefits of these projects. Nor, truth be told, would it hurt the governor’s own re-election bid in 2005.
And here’s the real beauty of this scheme: The first payment on the debt (which would be roughly $90 million to $100 million a year for 12 years) would come due in Fiscal Year 2007 the first year after Gov. McGreevey’s first term in office ends.
You have to admire the governor for his political shrewdness not to mention his chutzpah. But how this differs in any way, shape or form from the borrow-and-spend practices of the Whitman administration frankly eludes us. Is this supposed to be different because the bonds are backed by future federal transportation funds? That may save a tenth of a point on the interest rate, compared to the state’s own credit rating that backed all those bonds issued in the Whitman years. But it has nothing to do with the principal $900 million in new debt. And it runs directly counter to another kind of principle the governor’s own belief (which we happen to share) that borrowing now and paying it back later is precisely what caused the fiscal mess he inherited.
When he ran for governor, Mr. McGreevey foolishly boxed himself into an anti-tax corner from which he has yet to extricate himself. As a result, common-sense proposals like raising the gasoline tax, which would be paid for by out-of-staters as well as New Jersey motorists, get shelved in favor of gimmicks like the Garvey bonds, which will strap state taxpayers for 12 years starting after the next election.
And politicians wonder why voters are cynical.