New Jersey Hit By Wall Streets Fiscal Mess

New Jersey was in bad economic shape prior to the Wall Street subprime meltdown mess, but the recent actions have only driven home that fact even harder.

We learn that New Jersey lost up to $100 million in pension payments after losing half of its $200 million investment with Lehman Brothers that started in June. New Jersey officials are contemplating suing the company on the basis that they were misled.

Lehman this week filed for bankruptcy protection.

"That will potentially be the subject of litigation," William Clark, director of the Division of Investments, said during a heated meeting of the State Investment Council in Trenton Thursday.

The pension funds closed the books on a disastrous foray into Lehman this week, collecting between 22 cents and 32 cents a share for 1.8 million shares of Lehman they had bought for $28 apiece in June, the division reported Thursday.

Lehman, the 158-year-old investment bank that predates the Civil War and weathered the Great Depression, filed for bankruptcy protection on Monday after it failed to negotiate a sale for itself.

The fire sale disposal of shares in the financial company means the state lost $115.5 million on a $200 million Lehman stake in less than four months, sales results revealed by the Investment Division Thursday indicate.

New Jersey's pension mess was pretty bad to begin with, as it was billions in the red and there was no sign that the state was going to close that gaping hole.

Meanwhile, Governor Corzine, a Goldman Sachs executive before he became Governor of New Jersey, notes that New Jersey's tax and casino revenues are going to fall short of projections and might hit localities and property tax reimbursements. He offers no solutions, though you better watch your wallets since his idea of fiscal responsibility is to increase taxes and fees. He had previously engaged in back-door borrowing, which is how Corzine was able to claim that he had a balanced budget even when engaging in a multi-billion dollar debt financing scheme for education that was never put up to a statewide referendum.

Here's an idea. It's a novel one.

Cut spending. Sharply.

Get ahead of the curve and put the state on a solid fiscal path by eliminating programs that have never worked and are little more than state workers' jobs programs. There's plenty of fat to trim from the state budget, and it's long past time that these measures be taken. The state can ill afford tax hikes when businesses and municipalities are reeling from the Wall Street woes.

The problem is that Corzine will not bother to take that action. Nor do I expect him to change his mind and consider offshore drilling, which could open up a new revenue source and create jobs in New Jersey.