Bold Budget Gamble Could Transform New Jersey

 

Carl Golden

The Press of Atlantic City

March 18, 2010

 

The state budget, it's been said, is 10 percent a fiscal document and 90 percent a political one.

 

While the budget for fiscal 2011 presented by Gov. Chris Christie this week remains true to that observation, it will, if enacted, produce a revolutionary transformation in the traditional relationship between state and local government.

 

It will dramatically alter the manner in which tax revenue is raised and spent by counties, municipalities and boards of education as well as exert greater control over employer-employee contract negotiations at every level of government.

 

In addition to the billions in spending cuts (the fiscal part) the proposal takes the first step toward breaking the grip local governments have had for years on the state and forcing them to more effectively manage their own affairs (the political part).

 

With salaries and fringe benefits the principal cost drivers in local budgets, Christie has pledged to help control them by requiring employee contributions to medical coverage, revising civil service rules, reforming the pension system, amending the binding arbitration system and imposing by constitutional amendment a hard, no-exemptions 2.5 percent cap on property tax increases.

 

When Christie assumed office in the midst of the worst fiscal dilemma in decades, he warned the Legislature and local officials that tax increases were out of the question and they should brace for unprecedented cuts in spending and state aid.  He did not disappoint.

 

The political implications for the governor and the Democrat-controlled Legislature are enormous.

 

Acknowledging the cuts will inflict a great deal of pain, Christie made his case that the state had exhausted its options, spending had far outstripped income, and he would refuse to ask New Jerseyans -- already carrying the highest cumulative tax burden in the country -- to shoulder even more.

 

He has set the stage for a historic shift away from traditional governance by abandoning the practice followed for decades in which state financial resources were used in ever-increasing amounts to rescue local governments, which, in many instances, paid lip service to fiscal restraint secure in the knowledge that a bailout awaited in Trenton, regardless of which party held power.

 

He has undertaken a bold gamble.  He's shoved all his chips into the middle of the table and bet his future on public reaction being one of understanding the severity of the current situation and a willingness to accept short-term distress in the interest of long-term fiscal stability.

 

If property tax increases result from state aid cuts, he's banking on blame being directed toward local officials for failing to control costs rather than at him for failing to provide adequate funding.

 

Some Republicans in the Legislature may have doubts about the cuts and constituent reaction to them, but the administration will impress upon them that unanimity is essential to advance the governor's broader agenda.

 

The impact of the cuts in education aid, for instance, fall more heavily on suburban districts -- largely Republican -- than on urban areas, and some Republicans will be fearful about voting against their own best interests.

 

For the Democrat-controlled Legislature, the political implications are equally as great.  Efforts to restore spending will require identifying offsetting cuts, and such attempts will draw criticism that the party continues to favor more spending despite the public demand for shrinking government.

 

Assembly Speaker Sheila Oliver, D-Essex, may have tipped the Democrats' strategic hand recently when she said there is support among her colleagues to reinstate the so-called millionaires' tax on incomes exceeding $400,000, which expired in January.

 

Democrats have already attacked the budget as a bitter pill for the middle class but a sugar pill for the wealthy.  They could, as a matter of strategy, re-enact the tax surcharge, force a gubernatorial veto and use the-wealth-over-the-middle-class issue to sway public opinion.

 

The governor's proposed reductions in support for higher education -- a quintessential middle-class interest -- would figure prominently in any such strategy, along with dire predictions of a triple blow to taxpayers in the form of higher property taxes, cutbacks in local services and delaying property-tax rebates.

 

Given the current environment of personal economic uncertainty, it would be risky for the Democrats to oppose the imposition of a spending cap or requiring public employees to contribute to their health-insurance coverage.

 

Christie has undertaken a bold gamble in a very high-stakes game.  He has thrown down a challenge not only to the Democrats in the Legislature, but to county, municipal and board of education officials throughout the state.

 

Carl Golden served as press secretary to Govs. Thomas Kean and Christie Whitman and is a senior contributing analyst with the William J. Hughes Center for Public Policy at The Richard Stockton College of New Jersey.