“New Jersey Sinks Into the Abyss”

When Will the Abuse of New Jersey Taxpayer’s End?

Background Information

With the uncontrolled spending that’s occurring in virtually all Democratically-controlled states, the people must take drastic action or we will find 1) rational taxpayer’s considering revolution or 2) we will witness states lining up to declare bankruptcy because of the irresponsible actions of the political master puppeteers.

Concerned and responsible New Jersey citizens have reached the end of their rope. Each year they watch their taxes skyrocket without any perceptible benefit. Enormous sums of money seemingly disappear into the Black Hole of Calcutta through epidemic corruption, unbridled waste, irrational school spending decisions and outrageous pensions for the fatted calves of government. And worst of all, at this moment, due to the booming economy, most frugal states are reveling in unparalleled surpluses. So why is the state of New Jersey constantly putting the taxpayers on the rack for more and more money? Billions of dollars have been spent on new school construction, the least logical solution to improving the education system, in which school test scores show no improvement; the transportation fund is broke, and the state’s public employees enjoy benefits only dreamed of in the private sector.

· During the recent gubernatorial election campaign, the budget people were telling us they needed at least $28.6 billion to run the state, but revenue would be $4-$5 billion less than necessary to support that budget.

· Governor Corzine’s $30.9 billion budget is supposed to put New Jersey on a fiscally responsible path, once and for all. The budget is $2.6 billion or 9.2% above the adjusted appropriation for fiscal year 2006.

· Thirty years ago, they told us that the introduction of the very small sales tax would solve the state’s financial problems. That ploy didn’t help much.

· Then they told us that the income tax would solve all of the state’s financial problems. That didn’t do it.

· Then they told us that the revenue from Atlantic City gambling would solve all of our problems. That wasn’t the solution.

· Then they told us that the Lottery would solve all of our problems. Wrong again!

The state of New Jersey will be the petri dish to decide when the citizens have had enough. Newly elected Governor Jon Corzine spent $39 million during his election campaign (mostly his own money) to win the election in the heavily slanted Democratic state. Governor Corzine did not actually say he would not raise taxes and now he has submitted his budget to the legislature for their approval. The Apathetic Voter recorded the governor’s campaign promises – review these promises at Tracking Governor Corzine's Campaign Promises.

This special edition article consists of a five part analysis of the future Dante’s Inferno for New Jersey taxpayers:

1. Governor Corzine’s justification for his new budget

2. A New York Times article that bluntly foretells the reality of new Jersey’s political/economic future

3. The Apathetic Voter’s assessment of the drastic steps that must be taken to reduce the budget

4. How much will this new budget cost the average New Jersey taxpayer?

5. How can you protect yourself in the future?

Governor Corzine’s Budget Numbers

When the candidates from the two major parties were campaigning for the governor’s seat, people carefully planted the candidate’s campaign promises in their subconscious, fearful of massive tax increases in the near future. The proposed 2006-2007 budget was $28.6 billion and property tax rebates, a major campaign issue, are in reality nothing more than a nonsensical ploy to make taxpayers jump for joy because the government gave money back. Well, these rebates have been reduced to pennies on the dollar in Corzine’s new budget. And what sense does it make to restore rebates when tax increases abound in all other areas?

In early March, Governor Corzine, the financial genius of Wall Street, unveiled his budget – and it wasn’t a sharp reduction below the $28.6 billion – it was a sharp increase to $30.9 billion – shocking even the most hardened liberal admirer. The state’s budget has grown from $12 billion in 1990 to $20 billion in 2000 to $30 billion in 2006, and this number does NOT include outrageous increases in property taxes. Corzine claims that the reason for the substantially higher budget is because of factors out of his control including mandatory contractual agreements with state workers, payments to the pension fund, and a large amount of money to bolster the transportation fund. The saddest part of this travesty is that the governor claims that the majority of the costs are “Mandatory,” in making pension contributions, school construction and aid, and even minimal debt service. How can the major elements of a budget be “mandatory?” What went wrong? Who were these incompetent legislators and administrators who screwed up big time?

What most citizens don’t realize is when we talk about the state budget, there are two components: 1) the $30.9 billion state budget and 2) the $34 billion collected in property taxes by local municipalities, of which $20 billion is spent on education, for a total of $64 billion. That’s about $8,000 per citizen (men, women and children) that’s being extorted from our hides. According to the State Treasurer, New Jersey’s bonded debt has more than tripled over the last ten years. Even more nauseating, New Jersey’s budget surplus as a percent of its spending ranked 46^th among all states.

State and Local Employment Balloons

In June 2006, The Star-Ledger revealed that since 2000, local and state governments have added 59,400 employees while the private sector has remained stagnant. From 2000 to 2002, state spending increased 21 percent, even as revenues declined by 23 percent. Lawmakers did little to curb spending during this recessionary period and in 2003, New Jersey was ranked as the number one state for tax increases. The current budget will also place the state in that familiar number one slot for 2006-2007 while population growth since the late 1990s has averaged 0.4 percent.

Total local and state government employment is now 580,000 employees. Assuming an adult population of about 4 million taxpayers, this means that 1 in 8 adults are employed in local and state government in New Jersey. Let us not forget that this does not include federal employees represented by the hundreds of thousands of people in the legal system, IRS, Social Security, National Guard, FEMA, etc.

How can the local and state governments indiscriminately add workers while the population and economy have remained stagnant? Its simple folks. They don’t labor under the same constraints you and I do in balancing our checkbooks. They simply raise your property taxes and the sales tax. They don’t need to show a profit like a business. They don’t have to restrain expenses in any sense like a business. They simply tell you and I to fork over more money. They don’t care if it takes food out of your baby’s mouth. They need a larger budget to waste and from which to blindly steal from the taxpayers.

In contrast, right next door, the state of Delaware has NO state sales tax and their property taxes are about 10-20 percent of the average New Jersey taxpayer’s burden. Does this mean that their children are thrown to the wolves and receive an inferior education? Apparently not according to federal test scores. If their roads and bridges are falling apart, then why have hundreds of thousands of New Jerseyans retired and moved to Delaware, including many retired New Jersey state workers?

Significant Tax Increases

To meet this mammoth budget, Corzine has proposed the following major tax increases, that affect all of us.

No.	Tax Increase	Amount
1	Increase state sales tax from 6 percent to 7 percent.	$1,400,000,000
2	Hospital provider tax – charged to “wealthier” patients	$430 million
3	Sales tax on private investigators, golf and health clubs, certain landscapers, shipping services, self-storage facilities, etc.	$248 million
4	Corporate Business Tax (CBT) – surcharge of 2.5 percent	$60 million
5	Urban Enterprise Zone Reform – reduce fraud and abuse by forcing businesses to collect sales tax on equipment purchases	$100 million
6	Rural Policing – Localities that request police protection will reimburse the state (affects 98 towns in Hunterdon Sussex and Warren counties)	$24 million
7	Increased cigarette tax to $2.75 per pack	$80 million
8	Realty transfer tax on properties over $1 million – surcharge	$17 million
9	Surcharge on new luxury car registrations	$17 million
10	Water supply surcharge – increase of $.04/1000 gallons	$12 million

If nothing else, how can we tax hospital beds? Are not healthcare costs one of the major problems faced by society? And what about the surcharge on the Corporate Business tax and the new businesses that must pay sales tax? Will we not expect many businesses to bail out of the state as quickly as you can say “Jack Rabbit?”

So where will the money be spent?

The governor’s budget allocates spending as follows:

No.	Budget Item	Amount (Billions $)
1	State Aid	$12.505
2	Grants-In Aid	$10.335
3	Operating Departments	$4.082
4	Interdepartmental	$2.245
5	Capital Construction	$1.275
6	Debt Service	$0.433

The worst part of this budget is that aide to municipalities will be reduced by $25.5 million from the current budget. We can all expect significantly higher property taxes to compensate for the revenue lost by these communities. Various (Republican) politicians said you could expect a 7-8% increase in property taxes.

As a part of the new budget, the governor proposes to create a new Office of Economic Growth, a new Office of Homeland Security, and a new Department of Children and Families. Will this solve any problems? The answer is absolutely not! This ruse will simply create 3 new bureaucracies that will grow like a cancer siphoning off taxpayer money with imperceptible benefit. And new Attorney General Farber proposes to establish a new corruption unit no doubt staffed with hundreds of lawyers and investigators. What happened to the several hundred lawyers and investigators that work for the Attorney General now? What will they do, twiddle their thumbs? The budget predicts a savings of $55 million based upon some pie-in-the-sky formula for recovering fraudulent practices. We’re sure that she will be just as successful as was Peter Harvey in his quest to prosecute corruption because these political appointees owe their allegiance to the party currently in power – the Democrats.

The New Jersey state constitution requires that a balanced budget be in place by June 30 at midnight. The Republicans, a distinct minority, were never considered in the equation, as they would be opposed to the sales tax increase to the man.

Classic Political Treachery

Democrats in the Assembly, who are up for re-election every two years, worried about how this bombshell would be received by their constituents. New Jersey is divided into two classes of Democrats: southern Democrats and northern Democrats. The northern Democrats, which control heavily minority areas like Newark and Orange, are repeatedly elected by citizens even if they decide to put Saddam Hussein, Joseph Stalin and Adolph Hitler on the ballot; they would win in a landslide. They could have as well told the same acquiescent citizens the sales tax was being increased from 6 to 16 percent. It would make little difference. They would simply tell their constituents that the money was going to fund “vital” programs. It was the southern Democrats, headed by Assembly Speaker Joseph Roberts, who were shaking in their boots. For they well remember when former governor Jim Floria raised taxes by $2.8 billion in 1990. The Democrats were massacred in the subsequent election.

In mid-June, Roberts and other Democratic leaders met with Corzine and announced that a sales tax increase was dead in the Assembly. But Corzine, for good or for bad, held firm. He told them if the sales tax was not passed, “draconian cuts” would be necessary everywhere.

Corzine then told the Democratic leaders that it would be necessary to shut down the state if his sales tax was not made law, for he intended to challenge the status quo that has run the state since eternity. Democratic leaders, disbelieving he would take that drastic action, held firm in their position, too.

On July 1, Corzine signed an executive order shutting down all but “essential” government services. With the shutdown, 45,000 state workers were furloughed plus an additional 55,000 private workers (casinos, racetracks, etc.) were put out of work. State workers who work at the racetracks, lottery and casinos were considered non-essential. Now that makes little sense as these people are involved in direct revenue raising activities until you examine the underlying current. Corzine wanted the southern Democrats to feel the pain of their constituents. It was a deliberate action to bring the recalcitrant lawmakers into line.

There was NEVER a question these people would not be paid. More importantly, if the state workers would not be paid, why did New Jersey residents not witness 50,000 state workers campaigning for a balanced budget at the state house in Trenton when the same number of people protested potential cuts in their health care and pension benefits. That’s because they quietly knew they would get their paychecks perhaps a few days later than usual. In the meantime, they had a lovely extended but paid July 4^th holiday.

The irony of the decision to close most government offices was that the public was lead to believe that these people would not be paid. Of course they will be paid (that decision has already been made), so why the political tomfoolery? They can’t alienate the largest voting block in the state. Let us not forget that the governor will be coming up for re-election in 2009, and he may have aspirations involving the White House. So the governor needed to show he was “doing something” about the budget impasse.

Corzine and the disgruntled Democrats finally came to agreement, the budget was passed, and all state workers are back at their posts. But the only way the budget was passed was to load it with $350 million dollars in pork, with $204 million going to Democratically controlled municipalities, $3 million to Republican controlled districts and the balance to split or uncertain districts within the state. Somehow the words “worthy” and “vital” seem to always sneak into the equation.

$71 million of the grants were awarded to Newark, which is almost totally supported by the citizens of the state. Newark citizens only pay 5 percent of the cost of their infrastructure and education bills.

Next Year’s Budget

Even as the budget prediction for next year predicts more chaos, ten minutes after the budget was balanced, Corzine laid out plans to borrow $7 billion on the empty premise of saving money by consolidating services throughout the hundreds of independent districts and municipalities throughout the state. Herein we have the classic misleading dialog about the enormous sums of money that will be saved by consolidating duplicate administrators and consolidating fire and police. The $7 billion will be used as an enticement to overwhelm the objections of the people who want to continue their independence from the machine.

The proverb, “Those who ignore history are doomed to repeat it,” immediately comes to mind. How many times have the people been sold a bill of goods about cost savings when after a few years their taxes continue to rise to support the new infrastructure and personnel that seemingly pop up in larger administrations? One of the dire consequences of consolidation is that volunteer fire departments, which are able to purchase excellent equipment (since they don’t have any labor costs), will be replaced with paid professional firefighters with the inherent cost increases, plus the major impetus is that local communities will lose oversight and control over their individual budgets – the precise desire of the power hungry state politicians.

New York Times “Reality” Article

If you are like most voters the Apathetic Voter has encountered over his lifetime, rarely do we accept what politicians say at face value. We all know there’s a varying degree of chicanery and outright dishonesty behind every statement. So whom can we trust? The New York Times ran a multi-page article in which they laid out, in painstaking detail, the brutal truth of the financial situation that has fallen on New Jersey taxpayers mainly because of the incompetent and corrupt representatives who find their way into office (rarely do we actually elect our chosen candidates because the machines decide who gets on the ballot).

Below, we encapsulate the New York Times findings which vary drastically from the blarney we hear out of Trenton:

· If nothing is done to check the galloping increases in health care and pension costs, the state’s expenses (disregarding all other budgetary considerations) will rise 40 percent over the next four years to at least $40 billion.

· “The numbers portend bigger government, more expensive government and increasingly desperate government.”

· “In its aging population, high-cost climate and relatively slow growth, New Jersey shares problems with states like New York, Connecticut, Massachusetts and Illinois.” (Note where the states are located.)

· “… The state in the last decade has been unusually reckless by any standard. It borrowed against all of its nationwide tobacco settlement –netting about $2.8 billion – which is to be disbursed over 25 years – and spent it in two years.”

· Health and pension benefits were 8 percent of the budget last year and will comprise 21 percent of the budget by 2010 (if the state cannot renegotiate its contracts with the powerful unions).

· Costs to the state in the pay-as-you go health system would go up about 18 percent per year. State workers pay $3 for a generic drug prescription and $5 for a visit to the doctor.

· The state’s Medicaid budget has been growing unchecked at 14 percent per year.

· The state has a huge hole in the pension system too, because the state deferred annual payments to the funds starting with the Whitman administration and continuing unchecked today. The state needs at least $11 billion to plug the immediate gaps. In total, it is estimated that the state is $30 billion in debt.

· The Benefits Review Panel recommended changes to both the health care and pension benefits, but the all too-powerful unions will resist every effort to reign in costs.

· In a single vote in 2001, the Legislature fattened pensions by 9 percent in a rush to grant “political favors.”

· The state ranks fourth in per-pupil spending. Much of the expected increase in school spending will be devoted to aid to the state’s 30 poorest districts.

· Governor Corzine must find new “recurring revenues (taxes)” that will help increase the state’s total tax faster than the usual growth of 3 to 4 percent.

· One Senator, Leonard Lance wants constitutional spending limits and a reclassification of some of the richer “poor” school districts.

· The state may consider selling off state assets, such as Horizon Blue Cross and Blue Shield to increase revenue. Even selling the Turnpike has been mentioned as a sellable asset by a few drug-induced legislators.

· With all of the economic woes, the governor is proposing to restore the property tax rebates ($1 billion), which was one of his primary campaign promises.

The Apathetic Voter’s Analysis

Now here’s the Apathetic Voter’s appraisal of these enormous problems:

· The governor has likely been advised to hit hard on taxes in his first year, and then using some voodoo, find a magical formula in his last year in office to reduce the budget by .0001 percent and pound his chest while telling the people he has reduced taxes, to support his re-election. Unfortunately, the people have a very short memory. This ploy is not unique to New Jersey. Virtually all politicians, hoping that the busy citizens won’t remember the huge tax increases that occurred in the first few years of the administration, use this shell game.

· In typical cowardly political fashion, the Governor has not proposed one major STRUCTURAL change that could lessen the taxpayer’s burden.

· STRUCTURAL changes and cost cutting must be enforced to stop the endless spiral of all-consuming government, that will also permit reinstatement of certain critical budget costs without costing the taxpayers a dime more in taxes.

No.	Major MANDATORY Structural Changes and Cost Cutting	Estimated Cost Savings
1	In addition to Corzine’s proposal to lay off 300 non-union workers and eliminate 700 UNFILLED politically appointed positions, lay off 10 percent of the state’s work force. This is a common practice in corporate America, wherein every few years companies fire 10 percent within every department for no other reason than to rid the company of accumulated “dead wood.” Based on the Apathetic Voter’s personal dealings with state and county workers over the years, eliminating 10 percent of the state work force of 88,000 employees, or approximately 9,000 employees, will have absolutely no affect on “service.” If the union goes on strike to protest the cuts, fire and replace all of them with new employees and then only permit a new contract that’s much friendlier to the taxpayers, without PERPETUAL employment. Can we all remember how President Reagan handled the Air Traffic Controllers in the 1980s?	$700,000,000
2	Implement a radical restructuring of the civil service and pension system: · Permit supervisors to FIRE incompetent employees, provided that they have carefully documented the reasons for the dismissals. To fire someone in the civil service system today is virtually impossible with appeals processes that can take 10 years while the employee still draws his or her salary. · Revise the pension system to provide a pension based on an average of earnings for ALL years of employment and not the HIGHEST three years. Calculate pension payments based on private sector policies in lieu of the very generous payouts currently in vogue. Replace the lucrative direct-pay pension system with a 401(k) plan in a similar manner to Corporate America. · Increase eligibility for full retirement from 25 to 30 years of employment. · Substantially increase employee’s contributions to health care and pension benefits to reflect practices used in the private sector. Currently, active and retired state workers pay $3.00 for a generic prescription and $5.00 for a doctor’s office visit. Consider using health accounts, the bane of the liberal mindset. · Eliminate the payment for unused sick days when employees retire, and if they haven’t taken vacation days after two years, the days are lost forever. Paying that huge amount of money for hundreds of days upon retirement is unheard of in the private sector and totally unacceptable. · In addition, remove all political appointees from the pension system, immediately. The system was intended for full-time worker bees and not political hacks. State employees must recognize that the munificent policies granted by either incompetent or corrupt politicians are a thing of the past. If the unions will not agree to these terms, fire all of them and …. See item 1 above.	$300,000,000
3	Ignore the Supreme Court that mandates construction of new schools. The Supreme Court is supposed to resolve individual disputes – it is the legislative and executive branches of government responsibility to set policy. When the judiciary upsets the careful balance between the three branches and sets the course of public policy, then the entire process of the people voting for and electing representatives becomes meaningless. Citizens will no longer believe they can affect the laws that govern them, and democracy slides into the abyss.