Pulling
no budget punches
Corzine warns of deep cuts and
possible tax hikes ahead
Tuesday, March 07, 2006 • BY JOE DONOHUE •
Star-Ledger Staff
In his starkest remarks yet about the
state's bleak financial outlook, Gov. Jon Corzine said
yesterday he will have to impose deep cuts and possibly
raise taxes to close a projected multibillion-dollar budget
gap.
"New Jersey is on the verge of fiscal
disaster. And this is our day of reckoning," Corzine told
more than 350 representatives of unions, businesses,
consumer groups and colleges invited to a sobering
information session at Rutgers University in New
Brunswick.
Corzine will recommend a new state budget
in two weeks. He said during last year's campaign that tax
increases would be a "last resort." But yesterday he
acknowledged he doubts that cuts alone can overcome a
shortfall that his advisers now project at
$4.5billion.
"There are real cuts coming, and if we're
not able to do it all with cuts, we'll fill that gap," said
the governor.
Former state Treasurer Michael Horn, a
Republican and a member of Corzine's transition team, said
he thinks tax increases are inevitable. "I think enhanced
revenues through tax increases, whether they be permanent or
temporary, will have to be done," Horn told the
gathering.
Some of those attending the five-hour
session said they were stunned by the governor's
candor.
"Quite frankly, I've got knots in my
stomach right now because it's abundantly clear to me
there's going have to be some hard choices," said William
Dressel, executive director of the New Jersey League of
Municipalities. "I am very concerned that municipal aid
could be on the chopping block."
James Hughes, a Rutgers University
economist who listened to the presentation, said few
governors have spoken so openly about a budget before giving
their formal address.
"This is unprecedented and it's probably
a very, very wise move," said Hughes. "Because the problems
are going to involve an awful lot of pain and you might as
well be out in front and prepare people for what's
coming."
In addition to yesterday's meeting,
Corzine has slated town meetings with the public about the
budget crisis tonight at Montclair University, tomorrow at
Monmouth University, and Thursday at Rowan University. All
three start at 7 p.m.
Corzine said that after more than two
decades at the investment firm Goldman Sachs, he understands
the need to be accountable to "stakeholders" -- in this
case, the general public.
"There needs to be a dialogue so that
people understand that these choices we talk about are not
free. They come with real costs," the governor
said.
"This year's budget is in trouble, plain
and simple. You could argue about what the size of that
trouble is. But it's real. We've got a huge hole to fill,"
Corzine said. He added that he believes he won election
because people expect a "business focus on the problems we
have as a state. I intend to deliver on that."
While Corzine deftly avoiding speaking
the "t-word" directly, his transition team weeks ago
recommended a temporary surtax, possibly on state income
taxes, and an extension of the sales tax to currently
untaxed services as possible solutions.
On a recent radio show, Corzine raised
the possibility of a gross receipts tax like one used on
businesses in New Mexico. Business lobbyists also are
nervous that Corzine will reinstate about $400million in
corporate taxes that are scheduled to lapse when the current
budget year ends June 30.
Former state Treasurer Clifford Goldman,
a Democrat, said Corzine is a victim of too many years when
state officials of both parties spent too much, then delayed
dealing with the full cost through fiscal tricks like
borrowing and raiding the unemployment trust fund. Just
between 2002 and this year, officials raised about
$16billion through these gimmicks, Goldman said.
Court edicts also have made the state's
budget problem more difficult. On the one hand, the state
Supreme Court ordered billions in new spending for poor
school districts. But it also has banned the state from
using new debt to balance the budget.
Goldman said spending will consistently
exceed revenue growth unless Corzine takes painful steps now
to bridge the gap.
Corzine said a crackdown on waste, fraud
and abuse will only go so far. He estimated, for example,
that it might reduce Medicaid costs by $50million next year.
But he said the efforts will not be anywhere near enough to
close the gap, or avoid tax increases. "It is not going to
be a fundamental solution to our budget problems," he
said.
Added new Treasurer Bradley Abelow: "We
don't have great choices. There is no choice but to reduce
the growth of state spending."
While the news presented at Rutgers was
all grim, Corzine sought to assure school board officials
during an earlier meeting that he will try to maintain the
current $9.7billion in state funding for local school
districts.
Joe Donohue covers state government and politics. He may
be reached at jdonohue@starledger.com or (609) 989-0208.
© 2006 The Star-Ledger. Used by NJ.com with
permission.
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