Tuesday, January 08, 2008

Trenton Thinks Money Grows On Trees

So much for fiscal discipline. Trenton approved Jon Corzine's rejiggering of state aid for education, which is really a massive expansion of the failed Abbott school funding program. The final Senate vote was 23-9, with 9 abstentions. Three Republicans switched their votes to approve the measure at the last moment, which suggests that they realized that they would be able to claim that they were bringing home the bacon for their constituents - state fiscal stability be damned. The Assembly passed this bill in 80 minutes, which again tells you all you need to know about Trenton politics.

The governor is expected to sign the bill, which increases state aid for education by more than $500 million.

Who exactly is paying for this? Where is the money coming from at a time when the state is $3 billion in debt.
As with the current system, the plan still will rely on the Legislature and governor to include all costs in each year's state budget. It does not establish any new sources of funding for state school aid: As at present, local property tax bills will cover the majority of school bills.
In other words, your property taxes will continue to rise and the New Jersey residents will continue to face the worst tax burden in the country with no relief in sight. The only way to get this situation under control is to control state spending, and no one in Trenton is prepared to take that step, even as Corzine claims that the budget will be no larger this year than last year.

Enlighten NJ has much more on the way state aid will be calculated under the new system.

Meanwhile, Corzine looks to soak drivers in New Jersey (and those that drive through New Jersey on their way elsewhere - think all those truck drivers who drive the I95/Turnpike Corridor). In his state of the state message to be delivered today, he's proposing a 50% hike in the tolls, the first increase will occur the year after he leaves office in 2010 and would be hiked 50% again every four years thereafter, along with periodic inflation adjustments upwards. Also, tolls would be extended to Route 440, which runs from the Outerbridge Crossing to I287 at the NJ Turnpike/GSP interchange. That is part of his plan to stabilize funding for transportation and to reduce the state's crushing debt load.
Those familiar with the plan said putting tolls on Route 440 is essential if the state is to get even close to the $40 billion windfall Corzine is hoping for from his effort to "monetize" the state's toll roads. It's more likely the plan will end up netting about $30 billion for the state, the sources said.

Corzine said he plans to pay off at least half of the state's $32 billion in debt with those proceeds. That would free up at least $1 billion in the yearly state budget that now goes to pay interest on the debt.

Whatever other money is raised would be used to replenish the Transportation Trust Fund, which pays for road construction, "for years to come," one of the sources said. Without a new infusion of money, the fund is expected to be exhausted by 2011.

The administration has closely guarded details of the plan, which has been in the works for more than a year. Corzine even went to state court to fight against making public a study produced by UBS, the state's outside adviser on the monetization plan.

Corzine during the weekend confirmed that he will propose freezing the state's budget at its current level for next year.

The Star-Ledger reported Sunday the plan also calls for amending the state constitution to require voter approval of any future borrowing by the state, unless it is backed by a dedicated revenue source, such as increased tolls. Republican leaders in the Legislature have been agitating for such a move.

The administration has not revealed the actual amount tolls would rise under the plan. Corzine last summer pledged that any toll hikes would be made according to a schedule that lays out increases year-by-year, and that once the schedule was finished, it would be made public.
Both of those goals are laudable, but taxing the way out of the problem doesn't solve the structural deficits, which are due to spending more than the state is capable of funding.

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