Even among California, Illinois, and nearby New York State, New
Jersey is renowned for the fiscal profligacy of its state and
local governments. Known around the world as the backdrop for
The Sopranos, Ivy League giant Princeton University and
scandal-plagued Vegas wannabe Atlantic City, New Jersey saw its
municipalities and state agencies spend $96 billion in taxpayer
dollars during the 2008-2009 fiscal year, nearly double the
expenditures of a decade ago — and outpacing the 74 percent
increase in spending among all states in the same period.
But by year’s end, New Jersey may end up as reputed
for spending cuts, clampdowns on lavish public pensions and
staring down affiliates of the mighty National Education
Association, as for Miss America, its famed turnpike, and the
Jersey Shore. Most-surprisingly, it is happening in a
most-bipartisan manner.
On Monday, the Democrat-dominated state senate
approved measures capping the payments civil
servants could receive from cashing in sick days to $15,000 (from
the more generous one day’s worth of pay for every two unused
sick days) and banish part-time workers from qualifying for
public pensions. The final bill will likely be approved by the
state’s lower house and signed into law within the next month.
Two weeks earlier, the new governor, Chris Christie (a
Republican), took steps
to deal with the state’s $58 billion deficit for retiree
healthcare liabilities (as of 2007) by ending free healthcare for
teachers (and other bureaucrats). They will be required to
contribute 1.5 percent of their salaries to fund medical
coverage.
Meanwhile Christie looked to rein in the state’s public
schools, which spend more per pupil than every state except for
much-smaller Vermont and Wyoming (and managed to increase
spending by 8 percent in 2008-2009 despite declining tax
revenues). Last week, he announced that $475 million in state
funding would be
withheld from local districts in order to plug
up a $1.3 billion hole in this year’s budget. This included
slashing $126 million in funds for ten school districts —
including Newark and Atlantic City — which managed to generate
$109 million in surpluses during the last fiscal year despite
consistently demanding additional state funding to address their
academic and bureaucratic failures. Notes local education blog
NJ Left Behind: “Within these districts reside extremely
needy kids. Why is this money in surplus — intended to be rolled
over to next year’s budget — rather than used for additional
services right now?”
Certainly none of this is beloved by New Jersey’s public
employee unions, who find themselves not only battling Christie
— who made battling the unions a centerpiece of his successful
gubernatorial campaign last year — but even Democrats such as
state senate president Stephen Sweeney, an organizer for the
International Association of Ironworkers. Bob Master, a spokesman
for the Communications Workers of America, which represents the
plurality of civil servants, warned that “Democrats will have to
start acting like Democrats.” The New Jersey Education
Association, whose possible endorsement Christie rebuffed last
year, has hit the airwaves, pushed out e-mails, and even set up a
Facebook page to battle the governor’s measures. Proclaimed union
president Barbara Keshishian: “[Christie’s] order could have
serious unintended consequences for the future of our public
schools.”
Given the influence of the unions, the threats may still
work. But New Jersey taxpayers and politicians, like their
counterparts in the rest of the nation, may finally be ready to
reckon with the costs reaped from decades of fiscal decadence. If
successful, Christie and his colleagues may present as compelling
a model for restraint as that offered by Indiana Gov. Mitch
Daniels since taking office six years ago.
UNTIL RECENTLY, POLITICAL LEADERS IN Trenton could
comfortably ignore the consequences of their fiscal recklessness,
largely because they could boast that New Jersey was a
(relatively) low-tax haven among even more-profligate East Coast
states. Nestled between New York City and Philadelphia, the state
once compared to an open barrel by Founding Father Benjamin
Franklin attracted shoppers from both metropolises to its
sprawling malls with lower sales taxes, lured families looking
for Levittowns without the accompanying high property taxes, and
became corporate headquarters for companies seeking campus-style
office space unavailable in big cities. Between 1950 and 2000,
New Jersey’s population doubled even as growth in New York State
and Pennsylvania barely budged.
This growth (and the taxes generated from it), fueled
spending sprees — including the construction of the Meadowlands
sports complex for the New York Giants and Jets football teams —
and deal-making between politicians (Democrat and Republican
alike) and public employee unions at every level. Municipal
governments hired 45,000 more employees between 1990 and 2002,
according to the Mercatus Center at George Mason University; the
state government added another 7,900 during that same period. The
state’s civil servants and teachers became among the
best-compensated in the nation’s public sector. The average civil
servant retiree collects $25,000 annually from New Jersey’s
pensions, 15 percent more than the national average. The average
retired teacher — who benefitted during her career from
near-lifetime employment thanks to tenure and free health
coverage — earned even more, collecting $34,643.48 in annuity
payments.
Occasionally, Garden State taxpayers rose up against this
profligacy. They ended the political career of Brooklyn-born
congressman-turned-governor Jim Florio in 1993 after he
successfully passed what was then the nation’s largest tax
increase in order to balance a $3 billion deficit. But for the
most part, they were more upset with auto insurers such as
AllState for steadily hiking premiums than with local government
spending sprees and the deals struck between politicians and
public-employee union at all levels of the public sector.
But the current recession — now in its fourth year — has
awakened New Jersey residents and politicians to the reality that
the status quo is far too costly to maintain. The possibility of
an $8 billion budget deficit in the 2010-2011 fiscal year is
forcing state officials to consider drastic measures. Nor can
they no longer ignore the long-term woes ahead. Besides the $34
billion deficit in its public employee and teacher pensions —
among the largest in the nation — there is some $101 billion in
long-term debt held by the state and municipalities that went to
previous spending sprees and previous budget-balancing tricks.
Then there are the long-term economic costs of hefty tax hikes,
which have made New Jersey’s property taxes the highest in the
nation. The average rate of 1.74-percent of assessed value paid
by Garden State homeowners is higher than the 1.14 percent paid
by colleagues in New York; the total in-state tax burden of 11.8
percent of income paid by New Jersey residents is the highest in
the nation, according
to the Tax Foundation.
These days, the lack of urgency shown by Christie’s
immediate predecessor, Jon Corzine (who stifled efforts by his
fellow Democrats to cut pension and healthcare benefits for state
employees) is no longer being tolerated. Christie, a former
prosecutor who ousted Corzine in stunning fashion last November,
is already hacking away at the current budget through an array of
executive orders and with assistance from the Democratic
legislature. Christie has told mayors throughout the state to
expect less funding from state coffers.
Either way, Christie and Democrat legislatures have much
weeding to do before New Jersey’s economic and fiscal gardens can
flourish again. This won’t be a respite at the Molly Pitcher
rest
stop.
