Friday, May 15, 2009

Corzine Proposes Cuts By Shifting Costs To Next Year

New Jersey Governor Jon Corzine wants New Jersey taxpayers to think that he's doing them a favor by cutting $150 million from the current year budget because it is coming up $1.2 billion short. Corzine intends to use $450 million from the rainy day fund, shift another $450 million into next year's bloated budget, and reducing the pension contribution by another $150 million.
On Thursday, Corzine said revenue projections he made back in March were off by $1.2 billion. That meant even more work to put the state budget back in balance before the current fiscal year ends on June 30 -- as required by the state constitution.

To do so, the governor said he will take $450 million from surplus and push $450 million in expenses from the current budget year into the new one that begins on July 1. He's also reducing the state's annual pension contribution by $150 million.

A list released by the state Department of Treasury today detailed the remaining $150 million that will be saved from state departments to balance the budget.

About $3 million will come from a program that helps prepare developmentally delayed toddlers for preschool. Another $2.7 million will be stripped from a program that pays for lead-poisoning screenings. Administration officials said the cuts are unspent funds that will be left over when the budget year ends.
Let's attack these step by step, because it's instructive to see how asinine Corzine's posturing has been.

For starters, how exactly could Corzine and his financial wizards in Trenton be so horribly wrong as to the state's financial picture. They were off by $1.2 billion in just one month. That's financial incompetence by not being conservative enough on revenue projections. They were assuming revenues would be there that disappeared. People aren't spending money, which impacts all tax revenues, and thus far the only response has been to contemplate tax hikes to make up for the revenue shortfalls.

New Jersey has a $1.2 billion budget deficit going into the FY 2009-2010 budget that begins July 1. Corzine's total cuts are $150 million to existing programs, and he's expecting kudos?

The two biggest parts of Corzine's solution are the raid on the rainy day fund and pushing costs into next year. The rainy day fund usage is warranted, since that's the purpose of the fund. However, pushing off the costs to next year does not address the fundamental problem with the structural deficits caused by decades of overspending. It creates incentives to continue overspending and obfuscates the nature of the state's spending. It is a lie.

Attempting to paper over the deficit by claiming that you're going to push it into next year's budget doesn't solve the deficit - it foists it onto the books for next year.

Then, there's the whole notion of cutting pension contributions. Shortchanging the pension contributions means that the pension funds will fall short when the time comes for redemptions. Corzine's policies make the state's fiscal picture worse.

A lot worse.

However, expect the media and social groups to complain about the state's cuts to various social programs, even as there are literally dozens of easily recognizable areas for savings.

Consider the following: eliminate the property tax relief program, along with the 1% sales tax hike that went to pay for it. Two programs that cost too much, and which are using one tax hike to pay and hide the costs of another.

I'd also suggest eliminating COAH and Abbott school spending (including Corzine's massive expansion of state spending on education that is simply unsustainable and unwarranted). The state engages in massive transfer payments and the results aren't promising - and haven't been for years. COAH (which is the state's affordable housing requirements) is neither affordable, nor does it actually create affordable housing because it ramps up the costs for everyone by distorting the market (and putting people who are in no shape to be homeowners in a position to fail miserably).

Wyblog has four other suggestions for cutting the state budget.

Instapundit links. Thanks!

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