Threshold Questions

There are a series of threshold questions that one should ask when examining all the budget documents coming out of various states when the FY 2009-2010 budgets are being discussed.

The first and foremost question should be: Is FY 2009-2010 larger or smaller than FY 2008-2009?

Many governors will claim that they're making painful cuts and that the budget will not be as large as expected, but the reality is that the budget is actually larger than the prior year, which means simply that these politicians are lying and that there aren't painful cuts at all. It's merely a spending plan that isn't as ambitious as they had hoped. This is a phenomenon common throughout the country, but one that takes on special relevance in New York and New Jersey.

Gov. Jon Corzine is making his budget address today, and it's expected he'll harp on the fact that he's proposing deep cuts and will raise certain taxes and fees, all while chopping the property tax rebate. He's proposing a $29.8 billion budget.

That leads to the second question: Are taxes and fees being raised to maintain the existing level of spending?

Invariably, the answer will be yes. Colorado has imposed fee surcharges on motor vehicle registrations to fund transportation safety projects. It may be for a worthy cause, but the net effect on taxpayers is that registration costs for vehicles will double.

New Jersey's looking to hike the payroll tax to fund unemployment benefits increase other fees and taxes including on tobacco, liquor, and wine. Also expect to see additional personal income taxes imposed on high income filers and the loss of property tax rebates for many people will be a net tax hike.

Property tax rebates would be preserved at current levels for seniors, the disabled and those making less than $50,000 a year. Households earning between $50,000 and $75,000 a year would get two-thirds of the rebate they received last year, officials said.

That would save about $500 million from the $1.7 billion spent last year on the popular program, which included staggered rebates for households making up to $150,000 a year. Those making less than $100,000 got an average of $1,115 back, while the elderly and disabled got $1,266.

Corzine is also expected to propose raising taxes on cigarettes, wine and liquor, as well as a one-year income tax increase on residents making more than $500,000 a year, officials said.

Never mind that the property tax rebate was funded by an increase in the sales and use tax. Now, taxpayers are going to continue paying higher sales tax and see less property tax relief because the state can't manage its books.

Spending isn't being cut, but rather taxes and fees increased to maintain an existing unsustainable level of spending. That, in a recessionary environment, is counterproductive and will only serve to further deepen the recession and make it more difficult for taxpayers and consumers to gain confidence in the marketplace because the government is taking a bigger bite out of their pocketbooks.

Then, there's the question of just how much money is coming from the federal porkfest/budget appropriations. In New Jersey's case, it's several billion dollars, which will go to fund Medicare and education.

Approximately half of the stimulus money goes to Medicaid, and much of the other $1 billion to education, according to two officials briefed on the plan. The officials requested anonymity because they were not authorized to discuss the governor's proposal.

Finally, are states actually moving to cut the size of bloated state workforces? In New Jersey's case, the answer is not really:

Corzine also wants to achieve up to $500 million in savings by asking state worker unions to agree to 12 days of unpaid furloughs and forgo a previously negotiated wage increase. The governor has also been laying the groundwork for layoffs of up to 7,000 people if no agreement is reached.

Bob Master, a spokesman for the Communications Workers of America, the largest state worker union, said Monday that negotiations are ongoing but "no agreements or compromises have been offered or made."

The unions have essentially a veto over the state budget because they will not give up their benefits or make concessions when there are taxes and fees that can be raised to maintain the status quo.