Tuesday, June 29, 2010

New Jersey Adopts An On Time Budget

New Jersey beat the July 1 deadline and enacted a $29.4 billion budget that largely conforms to the proposal outlined by Gov. Chris Christie. Spending was reduced - both the state spending and the federal component.
Christie's budget rejected major tax increases and cut 2.2 percent of state spending — or 8.6 percent including federal funds — from Corzine’s final budget. It marked a big milestone for the rookie governor, who campaigned on a platform of cutting spending and shrinking state government after a decade of Democratic control.

The budget cuts hit programs big and small, from the state’s largest expense — $10.3 billion in local school aid — to items such as the $7.5 million anti-smoking program, which will get nothing. Economic development grants have been curtailed, the Public Advocate Office was disassembled and the State Police will go without a new recruit class for another year.

Christie sliced $848 million from property tax rebates — which he said he’d cut as a last resort — and eliminated rebates for renters, while shirking a $3.1 billion pension-fund payment, ensuring next year’s required payment will be even bigger.
The failure to properly fund the pensions is an ongoing problem, and the only way the state could have fully funded the pension funds this year would have been to take on additional debt, or increase taxes to cover those costs. That simply was unsupportable.

Moreover, the pensions themselves are unsupportable and continue to drain state tax coffers even as the legislature tries to lard up benefits for state workers. And it isn't just the state workers pensions that are a problem. Local municipalities also have larded up the benefits over the years and the bill has come due. They can't afford the benefits they provide and taxpayers can't afford the tax hikes to support this.

The property tax rebates were a shell game - using one tax hike to cover for another, and it was doomed to failure from the outset. Christie's predecessor Jon Corzine enacted the rebates with much fanfare, but not only did it result in a higher sales tax, but property taxes continued rising above the so-called cap of 3.9%. Corzine then reduced the rebate because sales tax revenues dropped while maintaining the rebate, which drained state revenues from other sources and showed the folly of using one tax to pay for another's impact.

Christie wants to enact a constitutional cap of 2.5%, while the legislature wants a 2.9% Swiss-cheese cap that has so many loopholes so as to make the cap virtually useless - the same problem that dogged the 3.9% cap. Eliminating the rebates eliminated the spending for that program, but there is much spending that has to be cut.

This year's budget simply holds the line on spending from last year to this year and acknowledges the elimination of federal stimulus money to close the state's deficit.

Next year, the job will be to further reduce spending and continue working towards a benefits package that the state can afford.

Gov. Christie is also expected to sign a wind power bill that would provide incentives for wind power manufacturers and to spur the development of wind power facilities in the state that make economic sense. The Board of Public Utilities would have oversight capabilities and a $100 million fund to see development opportunities.
The "Offshore Wind Economic Development Act," is intended to help the state meet the mandate of its Energy Master Plan, which calls for the development of 3,000 megawatts of offshore wind by 2020.

The program will be administered by the Board of Public Utilities and will require that projects make economic sense for N.J. The states of Virginia and Kentucky recently rejected wind farm proposals because they were deemed too expensive.

The Senate passed the bill earlier in the day by a vote of 27 to 10. The Assembly approved the legislation by 71 to 6 with 1 abstention. It will now go to Gov. Chris Christie to be signed into law.

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